Greater competition from Australia and Egypt in the global market has dampened export prospects for California rice, and farmers say they worry they will have a harder time covering their production costs as they face lower returns and uncertainty in future farm programs.
“This year is kind of scary with all the high costs we have, like fuel, fertilizer, chemicals, labor and equipment,” said David Lundberg, a rice farmer in Butte County. “It seems like every year they keep going up. The budgets are pretty tight now. You have to make sure you really watch it and get a good yield.”
Lundberg noted the market price for rice has come down, even though California acreage and production both dropped last year.
Nathan Childs, an agricultural economist with the U.S. Department of Agriculture, attributes the price decline for medium- and short-grain rice to a weakened export market due to stronger competition from Australia and Egypt.
California exports about half its rice crop, with the largest market in Northeast Asia, which includes Japan, South Korea and Taiwan. While those exports have remained stable, Childs said, California’s other key markets in the Mediterranean and Oceania face substantial competition from Australia and Egypt.
In recent years, California rice farmers—who produce about 70 percent of U.S. medium- and short-grain rice—had benefited from poor production in those competing countries, he noted. Australia’s crop was sharply reduced by years of drought, while Egypt had not exported much rice due to water shortages and rice export restrictions imposed by the Egyptian government.
“Those factors have reversed,” Childs said. “Both countries are shipping more-normal levels of exports, and the U.S. has lost some market share, especially in the Mediterranean.”
Australia’s 2012-13 crop, which will be harvested in April and May, is expected to be the largest since its 2001 harvest and Egypt had a record 2012-13 crop, Childs noted.
Lundberg, who is not associated with Lundberg Family Farms, said he hopes prices will be higher but thinks it will depend on how much rice is planted. Farmers in Arkansas, Mississippi and Louisiana have switched to growing medium-grain rice in years when prices have not done as well for long grain, the dominant variety grown in the South. But with prices of competing commodities such as corn being high, Lundberg said farmers may grow more of those crops and less rice, boosting prices.
California’s 2012 rice acreage was 556,000, about 24,000 fewer than 2011, noted Chris Greer, a University of California Cooperative Extension farm advisor for Yuba, Sutter, Colusa, Sacramento, Placer and Nevada counties. He said he expects 2013 acreage will be about 525,000 to 550,000, “which would be about average for us if you look over the past 10 years.”
“The indicators are that the market has stabilized and is possibly on the up-trend,” Colusa County rice farmer Chris Torres said. “We’re hoping it’s going to get better, but we just don’t know.”
Both he and Lundberg said they do not have the kind of ground or equipment to switch to other crops and plan to grow the same amount of rice as in other years.
Another issue that has farmers worried and confused is the status of the farm bill and the future of direct payments. Even though the 2008 Farm Bill has been extended to September, Tim Johnson, president and CEO of the California Rice Commission, said farmers still face uncertainty about whether they will receive a full direct payment this year or one that is subject to cuts from sequestration, perhaps as high as 8 percent.
Rice farmers were told initially that the extension of the farm bill effectively extends their direct payments at the 2012 level for the 2013 crop. But as lawmakers grapple with how to pay for sequestrations, Johnson said, “there are discussions in Congress right now over a broad range of subjects relating to the direct payment,” including whether to eliminate them this year or just make cuts to the payments.
“From the commission’s perspective, it’s unfair to tell farmers that you’re going to have a continuation of the same farm program they’ve had for the last five years and then come back and change that program after you’ve already told farmers to go and sign up,” Johnson said. “It would be absolutely disastrous and unconscionable to take away the direct payment completely, with no other program in place.”
With these unknowns about the farm program, Lundberg said he’s watching his costs, spending less money and not buying any new equipment until he knows what Congress decides to do.
Johnson said most growers understand that direct payments likely will not be a part of the next farm bill, as “Congress has very clearly sent that message throughout last year.” It is expected that some form of revenue protection program will take the place of direct payments to provide a safety net for farmers, he added. However, the House and Senate have yet to reconcile their differences on specifics of such a program, he said.
Johnson said the commission has been advising farmers to set appointments with their local Farm Service Agency office early and sign up their acres. Farmers typically receive their payments in October.