Monday, February 7, 2011
Lower Input Costs Higher Harvest Yield Quality
Rice Rebounds From Two-Year Drop as U.S. Crop Shrinks
U.S. farmers are planting the fewest acres with rice since 1989 just as global demand surpasses production for the first time in four years, driving prices as much as 12 percent higher by December.
Plantings in the U.S., the third-biggest shipper, may drop 25 percent this year because growers can earn more from corn and soybeans, according to the median in a Bloomberg survey of nine analysts and farmers. Rice, the staple food for half the world, declined 4 percent last year, extending a 2.9 percent drop in 2009. The other crops jumped 34 percent or more.
“Why would you want to take that risk to plant rice, knowing that your income is going to be way down?” said Terry Hatley, a farmer in Marked Tree, Arkansas, who may not plant any rice this year after growing the crop for more than three decades. “Farming is a business, and you’ve got to look at the economics of it. Now, the economics on rice are very dim.”
Bangladesh, South Asia’s biggest buyer, doubled a target for imports in 2011 to curb prices, the Directorate General of Food said last week. The Philippines, the world’s largest importer, will probably start buying next month, according to the National Food Authority. While global stockpiles are predicted to be 26 percent higher this year than in 2007, consumption will gain 3.4 percent and harvests 2.6 percent, the U.S. Department of Agriculture estimates.
The Thailand export price, the benchmark in Asia, may climb as high as $600 a metric ton by December from $534 on Jan. 26, a gain of 12 percent, according to the median estimate in a Bloomberg survey of eight traders, exporters and analysts.
“The acreage war has begun,” said Dennis Delaughter, the owner of Progressive Farm Marketing Inc. in Edna, Texas, who expects futures traded on the Chicago Board of Trade to advance as much as 20 percent to a three-year high of $18 per 100 pounds by November. “Of all the futures markets in the agricultural sector, rice is the sleeper,” said Delaughter, who correctly predicted an 11 percent gain in prices last March.
Rice represents almost 50 percent of the food expenses of the poorest across the developing world, and 20 percent of total household spending, according to the International Rice Research Institute, based in Los Banos, the Philippines. In the U.S., 6 percent of incomes are spent on groceries, data from Euromonitor International show.
While the United Nations says global food prices climbed to a record in December, grain stockpiles have been replenished since 2007-2009, when the U.S. State Department estimates there were more than 60 food riots around the world.
Combined inventories of corn, wheat, rice and soybeans will end this year at 457.6 million tons, 21 percent more than in 2007, USDA data show.
Rice futures climbed the 50-cent exchange limit today in Chicago to $15.51 per 100 pounds, still 38 percent below the record $25.07 reached in April 2008. Traders anticipate prices no higher than $16.265 through January 2012, Chicago Board of Trade data show.
Hedge funds and money managers more than doubled their net-long positions, or wagers on rising prices, in the past two weeks, according to Commodity Futures Trading Commission data. Net-long positions were 3,403 contracts, the most in a year.
U.S. farmers have little incentive to stick with rice. Prices in Texas, the sixth-largest producing state, are only enough to break even, according to Larry Falconer, an economist with Texas A&M University’s AgriLife Extension in Corpus Christi. Switching to cotton, which has gained about 144 percent in 12 months in New York, would mean $200 an acre of profit, he said.
In Missouri, the fifth-largest U.S. producer, farmers can make about $50 more per acre on soybeans and $100 more on corn, said David Reinbott, an agriculture business specialist with the University of Missouri Extension in Benton. Corn and soybean futures climbed this month to the highest level since July 2008.
Wheat, corn and soybean prices jumped last year because crops were ruined by Russia’s worst drought in at least a half century, parched fields in Kazakhstan, Europe and South America and flooding in Canada. Rice prices fell because of ample supply. Output in the U.S. increased 7.6 percent to 7.44 million tons in the current marketing year, USDA data show.
U.S. production in the year that begins Aug. 1 will drop because farmers will plant 2.73 million acres, down from 3.64 million acres in 2010, according to the Bloomberg survey. The USDA’s first acreage estimate is scheduled for March 31.
A rally may spur governments to curb exports to protect supply and contain inflation, said Milo Hamilton, a former buyer for Uncle Ben’s, the rice unit of McLean, Virginia-based food and candy maker Mars Inc. Russia banned grain exports last year after its drought and Ukraine set quotas on shipments.
“The main problem, both now and in 2008, is whether countries will curb exports,” said Hamilton, the president of Firstgrain.com, a rice advisory service in Austin, Texas. “Twenty or 30 countries produce and export wheat, but I can look at my fingers and count the rice exporters.”
When rice surged to a record in 2008, India and Egypt banned shipments, Vietnam barred speculators from its domestic market and China imposed export taxes.
Global Food Prices
Global food prices rose 25 percent last year, according to the UN’s index. Food inflation in China, home to about 1.3 billion people, reached 9.6 percent in December while in India it stayed above 15 percent for a fourth consecutive week in the period ended Jan. 15, government data show.
Bangladesh doubled its rice import target to cool prices that surged to a record in December as consumers and farmers hoarded supplies, said Badrul Hasan, director for procurement at the Directorate General of Food in Dhaka. The goal was raised to 1.2 million tons for the year to June 30 from 600,000 tons.
The Philippines may import as early as next month, although probably less than last year, Lito Banayo, the head of the National Food Authority, told reporters on Jan. 11.
“The trigger will be pulled when the Philippines’ orders start coming in,” said Mamadou Ciss, the chief executive officer of Singapore-based rice brokers Hermes Investments Pte, who correctly predicted in 2006 that prices would double. Thai 100 percent grade-B rice may jump 22 percent to $650, he said.
Production in Thailand, the world’s biggest exporter, will increase 0.4 percent to 20.35 million tons this year, according to USDA estimates. In Vietnam, the second-largest shipper, output will be little changed at 24.98 million, the data show.
Vietnam will export about 6 million tons this year, compared with 6.75 million tons in 2010, Deputy Agriculture Minister Diep Kinh Tan said in an interview Jan. 4.
La Nina, the weather pattern that brought heavier-than- usual rainfall to parts of Australia and Asia in the past year, may persist through the second quarter, according to the Australian Bureau of Meteorology.
“There are so many reasons for prices to move up,” Dwight Roberts, president of the Houston-based U.S. Rice Producers Association, said by phone. “We sure are poised for a strong and upward movement in the market.”
Global Food Crisis Prices at Critical Levels
The world is at a tipping point with its deceasing food supplies, increasing demand, and prices. Further disasters which can easily happen from time to time are only a matter of when they will happen. Take action now to help yourself and your country be food self-sufficient instead of relying on dwindling food supplies from abroad and increasing prices.
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