INTERVIEW: USA Rice sees 'premium quality' underpinning 2021-22 exports, despite lower output

London — S&P Global Platts: The US Department of Agriculture (USDA) released its Prospective Plantings report on March 31. Does the USDA's projection of a 425,000 acre (171,991 hectare) medium grain crop match with what USA Rice is hearing?

USA Rice Vice President of International Trade Policy Peter Bachmann: Yes, the USA Rice's World Market Price Subcommittee met in February and shared industry estimates that were roughly in line with what the Prospective Plantings Report outlined last month. Typically we do see some deviation from the projections from the time producers complete the USDA survey and actually get in the field, so we wouldn't be surprised to see slightly more or slightly less planted acres appear in the USDA's Acreage Report in June.

Platts: The USDA also projected a year on year medium grain planting decrease of 11% in Arkansas to 120,000 acres (48,562 hectares). Do you expect that corn and soy gains could lead to more acres being shed or does this seem accurate?

USA Rice: The medium grain acres in the South seem to fluctuate in general, it is certainly very price driven. I have always felt like the general option was to plant rice or plant soybeans, and then if they decide on rice, will they plant a subset of those acres to medium grain. The high corn and soybean prices right now could certainly have an impact on rice acres that get planted, but I wouldn't say that medium grain plantings would be disproportionately affected.

Platts: The USDA also released its Rice Stocks report recently. In it they reported that US medium grain paddy stocks as of March 1 were down by 11% year on year. What is this mainly driven by?

USA Rice: I think the shortfall of the 2019 crop may have had some kind of domino effect on stocks. They were already on the lower end in March 2020 but then saw a lot of COVID-19-related retail demand in combination with the usual Asia business and some increased shipments to the Middle East.

Platts: Is it likely that some US destination markets will increasingly look to other products, such as competitively priced Chinese old crop, as a result of low stocks and reduced planting?

USA Rice: That could certainly be the case in some markets. Fortunately, the majority of the markets we work in really value the US medium grain for the premium quality that comes with it and new crop is often the preference. So, we'll hope those values hold true throughout 2021-22.

Platts: With water allocations becoming a consistent hindrance to Californian farmers, are the days of a consistent plus 500,000 acre (202,343 hectare) medium grain crop in the state over?

USA Rice: From what I see, California has been resilient through the last decade of off-and-on droughts. While there has been a significant transition of Sacramento Valley acreage to orchard crops, like almonds and walnuts, the majority of remaining rice acres are probably best suited for growing rice. In my opinion, we may see small acreage shifts in both directions from year to year based on water levels and rice prices, but their current acreage is well suited to meet their domestic and export demands.

Platts: Will the current container shortage on the US West Coast likely lead to a larger than initially expected carryover in California?

USA Rice: The container shortage has unfortunately been disruptive and damaging for literally everyone in the industry. USA Rice is working hard along with the other agricultural sectors that have been heavily impacted to press the government, Congress, or anybody to step in and help address this. Ultimately, the shortage has been more of a slowdown than a roadblock for us at this point. That being said, there is a chance it could push some July shipments into August which would technically have an impact on carryover figures.

Platts: Does Brexit offer up many opportunities for Calrose or even Southern medium grain sales to the UK?

USA Rice: Absolutely! The Brexit process has proven temporarily problematic because the lack of certainty over the course of two or three years has impacted our milled rice business that is handled through the AARQ auctions. However, we do see long-term opportunity to grow our markets for all US rice exports to the UK through greater market access and reduced duties resulting from a future US-UK Free Trade Agreement. All of that is obviously in the hypothetical while we wait for negotiations to resume and to see a final result, but the demand and the relationships with importers in the UK are certainly there and we are cautiously optimistic that it will prove a success story for us.

Platts: With many competitive medium grain varieties available in the world today, does Southern medium grain have many export markets now aside from Puerto Rico and Taiwan?

USA Rice: Because Puerto Rico is technically a domestic market for us, it's hard to bifurcate the sales there from anywhere else within the US, however that is a primary marketplace for Southern medium grain. Taiwan is another top destination, but I would also add that I know some has been shipped to the European Union and the UK in recent years. Turkey could again become an option for Southern medium grain shipments once a phytosanitary issue is resolved with the Turkish government. There are definitely less options for Southern medium grain in our export markets until customers begin to acquaint themselves with the product, which probably contributes to the reduction in planted acreage you mentioned earlier.

Platts: Is it possible that Southern medium grain could be submitted in Japanese or South Korean tenders in the future?

USA Rice: It is possible, and I'd say it is possible now. One of the challenges for Southern medium grain in those markets would be a change in the expectations those markets have for Japonica rice. The Calrose and other California varieties they are buying now are true Japonica varieties, very similar to what is grown domestically in Japan and South Korea. The medium grain varieties coming out of the South are both genetically different and raised in an environment that leads to a different final product than those markets are accustomed. The other challenge is that rice grown in the South is subject to a different regulatory environment than what's grown in California, so there may not be full blown equivalency for maximum residue limits between active ingredients in chemicals used in the South versus what is imposed by Japan and Korea.

USA Rice is the global advocate for all segments of the US rice industry with a mission to promote and protect the interests of farmers, millers, merchants and allied businesses. The US grows nearly 3 million acres of rice annually and exports just over 50% of that crop. USA Rice members are active in all major rice-producing states: Arkansas, California, Florida, Louisiana, Mississippi, Missouri and Texas. The USA Rice Farmers, USA Rice Council, USA Rice Merchants' Association and the USA Rice Millers' Association are members of USA Rice.