Rival Rice Growers Crush U.S. Farmers Already Beset by Trade War

(Bloomberg) -- Here’s another entry for the growing list of suffering U.S. agriculture industries: rice.

Just ask Richard Fontenot, a rice, soybean and crawfish farmer near Ville Platte, Louisiana. He’s considering letting some of the 3,600 acres (1,457 hectares) he plants with grain and oilseed to lie fallow this year as a result of slumping commodities prices.

“It stinks worse than you realize,” said Fontenot, explaining that he let 1,000 acres of soybeans go unharvested last year because of a lack of export demand. “It’s a reality, and we’re dealing with it.”

American rice growers, who are concentrated in southern states, are struggling to compete with increasingly fierce competition from major producers like Thailand, Vietnam and India, the world’s top shipper. Prices in the U.S. are below the cost of production, but still higher than those offered by rival suppliers, said Dwight Roberts, president of the U.S. Rice Producers Association.

Rival Rice Growers Crush U.S. Farmers Already Beset by Trade War

Chicago rice futures on a most-active basis have trended lower since early 2014. But the pain is especially acute now as the trade war with China has eroded demand for other American commodities. Growers like Fontenot used to be able to rely on earnings from soybeans during years when rice profits were low. Now, most agriculture prices are stuck in the doldrums.

The problem for U.S. rice is at least twofold: growing stockpiles, and some lost market share in top export destinations like Mexico, said Michael Deliberto, a rice economist at Louisiana State University. As some farmers ditch the crop, the falling acres could eventually mean a rebound for prices, he said.

A report released Feb. 22 at the U.S. Department of Agriculture’s annual outlook forum projects domestic rice acreage will decline this year. That will help stockpiles shrink. Meanwhile, U.S. Trade Representative Robert E. Lighthizer said Wednesday that rice has been discussed in the U.S.-China trade talks, while adding that it was a “complicated” issue.

Rival Rice Growers Crush U.S. Farmers Already Beset by Trade War

American growers ship about half of their crop and account for more than 10 percent of the annual global trade, according to the USDA’s Economic Research Service.

Competition among major Asian exporters has driven prices so low that rice from Vietnam can now be competitive with U.S. supplies to Mexico, said Roberts.

Many U.S. growers could comfortably make a profit with prices at around $14 per 100 pounds, he said. Futures in Chicago are trading near $10.50.

“I don’t see a light at the end of the tunnel,” said Dennis DeLaughter, senior market analyst at Vantage RM in Austin, Texas. “I’m telling my clients they should plant less rice.”

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