Rice Industry Gathers Steam

The weak dollar and a serious drought in Australia are helping bring California’s rice industry to a boil.

The state’s growers are shipping thousands of metric tons of Calrose rice to Israel, Jordan and New Guinea, countries that bought almost none of the grain last year. Canada has about doubled its purchases of the California grain and old-line customers such as Japan, Taiwan and South Korea are buying more.

All told, exports and overseas orders for medium- and short-grain rice have risen 38% this year compared with 2004, to 785,000 metric tons, according to a U.S. Department of Agriculture report released last week. And virtually all of the medium- and short-grain rice sold for export from the U.S. -- the sticky kind of rice typically used in sushi -- are grown in California.

“In the last couple of months we have seen a big jump,” said Andy Aaronson, a rice analyst at the USDA. “We are picking up business in areas where Australia is the usual supplier.”

Hampered by a persistent drought, Australian production has fallen to about a third of what’s typical. Adding to the luster of California rice are favorable exchange rates, which make it more competitive globally.

The state trails Arkansas as the nation’s second-largest rice producer, growing $468 million worth in 2003, the last full year for which statistics are available, according to the California Department of Food and Agriculture.

Still, though they might be selling more overseas, California farmers aren’t getting much money. Prices are depressed this year -- many farmers say rice sells for less than it costs to produce -- because a surplus of the stuff was grown in 2004.

That was a big turnaround from the previous season, when a small crop led to high prices. Farmers reacted predictably by planting wall-to-wall rice in Colusa and Glenn counties and other Northern California rice paddies. They sowed 600,000 acres of the grain in 2004, a 20% increase.

At the same time, favorable weather led to record yields and pushed the state’s output to 51 million hundred weights, a 31% gain. (Domestic rice production is measured in hundred weights, based on the now-defunct practice of storing the grain in 100-pound burlap sacks at harvest time.)

“It’s a huge amount,” said Charlie Mathews, who farms 4,000 acres in Marysville, Calif. “The most we have ever exported and sold domestically before is maybe 43 million.”

Prices plunged to an estimated 7 to 8 cents a pound in the current 2004-2005 season from the approximately 12 cents paid out last year, farmers say. Prices are set through a combination of government supports and what the Farmers’ Rice Cooperative and a group of private pools can get in the open market. The final returns for this year won’t be in until after the July 31 end of the marketing season.

Most of California’s crop is sold through two types of organizations. The Sacramento-based rice cooperative, which accounts for about a quarter of the state’s production, collects rice from its 900 members, then mills and packages the crop and finds customers such as breweries, food processors, retailers and overseas clients. It deducts the cost of its operations from the rice revenue and allocates what’s left to its grower-owners.

Private pools, which include global concerns such as ADM Rice Inc. and Connell Rice & Sugar Co., offer the same type of marketing services. They typically offer farmers some sort of minium guarantee, but the growers are essentially dependent on the pools to act as traders on their behalf and can’t control what price they get.

Some farmers are questioning why prices have fallen so far in the face of rising demand.

Greg Massa of Hamilton City, Calif., is trying to sell about 3 million pounds of rice he harvested last year. Massa, who farms about 700 acres in Colusa and Glenn counties, thinks he can get more for his crop by hawking it on Farmandtrade.com, an Internet exchange, than he would from the cooperative or the marketing pools, which he claims have little incentive to push for higher prices.

Strong export activity, Massa said, should turn the market around and make his holdings more valuable.

Moreover, Massa believes the USDA export figures are far too low. If trends hold, California could export 1.5 million metric tons, or 33 million hundred weights, a figure large enough to eat up much of the surplus crop, he estimates.

“Australia has basically no rice left. China ... will be a net importer. California will have a smaller crop due to the low prices and water sales to Los Angeles,” Massa said. “Why would I sell now at a loss when I can make some money later?”

His strategy is a gamble. If the market doesn’t firm up, Massa will to have to sell out at prevailing prices or risk having so much grain left over that he finds himself competing with the upcoming crop, including the rice he’ll plant in the coming months. California rice is planted in April and May and harvested in September and October.

Massa, a member of a trade group called Rice Producers of California, said the marketing cooperative and private pools low-ball California rice just to move it. The group is calling on farmers to band together and demand higher prices.

Others are skeptical of Massa’s claim.

“What’s the incentive for the people who are buying California rice to leave money on the table when they sell it?” asked Daniel Sumner, director of the UC Davis Agriculture Issues Center. “All farmers think you can do a better job of marketing their crop.

“But if the guys who are marketing rice were really screwing up and selling it for less than the market dictated, others would have jumped into the business.”

John Valpey, vice president for Connell Rice & Sugar in Colusa, said marketers “understand that growers would like a higher economic return.” But he added that traders “cannot control the quantity of rice” that farmers produce.