SIC 0112

Companies in this industry

Industry report:

This industry consists of establishments primarily engaged in the production of rice, or whose sales of rice account for 50 percent or more of the total value of sales for their agricultural production.

Industry Snapshot

More than 50 percent of the world's population considers rice a food staple. Per capita consumption of rice in the United States was estimated at around 25 pounds in the early 2010s, an amount that has grown continuously since the 1970s. About 85 percent of rice consumed in the United States is grown domestically. About 15,000 rice growers, primarily in California, Louisiana, Texas, Missouri, and Mississippi, produce more than 20 billion pounds of rice annually and generate more than $2 billion annually. Nevertheless, the United States is a relatively small player in the world market for rice. According to the U.S. Department of Agriculture (USDA), Asian nations represent nearly 90 percent of rice production and consumption. Although the United States produces less than 2 percent of total output, it is fourth in rice exports.

According to the USDA, U.S. rice growers planted over 3.13 million acres of rice during the 2009-10 growing season and harvested 3.10 million acres, up slightly from 2008-09 (3.00 million and 2.98 million acres, respectively). Yields averaged 7,085 pounds per acre, which was generally higher over the previous decade (the 2007-08 season was the exception, when yields reached 7,219 pounds per acre).

Rice production is measured by the hundredweight (cwt). One cwt equals 100 pounds. Beginning stocks for the 2009-10 season were 30.4 million cwt. Production totaled 219.9 million cwt, and imports added another 21.0 million cwt, for a total U.S. rice supply of 271.3 million cwt in 2009-10. Of that total, 130.5 million cwt was used domestically and 100.0 million cwt was exported. The remainder was accounted for in ending stocks held. While domestic use continued to trend upward, exports moved up or down depending on the year. In 2009-10, exports were up slightly over 2008-09 but still lower than 2007-08 numbers. Rice prices increased substantially during the first decade of the 2000s, from just $4.49 per cwt in 2002-03 to $9.96 per cwt in 2006-07 to $16.80 per cwt in 2008-09. Prices were estimated between $13.40 and $14.40 per cwt for 2009-10.

The 2007 Census of Agriculture, which is updated every five years by the U.S. Census Bureau, reported an estimated 6,085 rice farms, down from the reported 8,046 rice farms in 2002. The number of acres harvested declined, from 3.2 million in 2002 to 2.9 million in 2007, as did the amount of rice produced, from 210 million cwt in 2002 to 203 million cwt in 2008. 71 percent of rice farms were 500 acres or larger.

The leading rice marketing and milling companies in the United States in the late years of the first decade of the 2000s included private cooperatives Producers Rice Mill Company and Riceland Foods Company, both in Stuttgart, Arkansas. In 2009, Producers Rice Mill brought in $533 million in revenues with 600 employees; Riceland Foods posted sales of $1.23 billion with 1,750 workers; and American Rice had 250 employees and revenues of $221.6 million.

The United States produces long grain and medium/short grain rice. While long grain rice accounts for more acres planted (2.27 million in 2009-10), the yield is lower at 6,743 pounds per acre. Comparatively, medium/short grain rice accounted for 838,000 acres planted but had an average yield of 8,010 pounds per acre. Prices for medium/short grain rice also tend to be higher. For example, during the 2009-09 season, when prices spiked, medium/short grain average price was $24.80 per cwt, compared to $14.90 per cwt for long grain. Projected prices for the 2009-10 season were between $12.70 and $13.20 per cwt and $17.45 and $17.95 per cwt for long and medium/short grains, respectively.

Background and Development

Although rice is not considered a major U.S. crop, the U.S. rice industry is more than 300 years old. Rice was introduced in the United States around 1685, when British sea captain John Thurber brought a load of the grain to the colonies from Madagascar. Rice first appeared as a commercial crop in the Carolinas in the seventeenth century. After peaking in the mid-nineteenth century, rice production in South Carolina and Georgia began to decline as a result of the Civil War, bad weather, and increasing competition from Louisiana. The industry began to shift toward plantations along the Mississippi River where steam-powered river pumps provided a more efficient irrigation system than the Carolina tidal gates. Before long, the industry developed in the milling and shipping center of New Orleans and grew rapidly and independently amid the explosive transformations of the U.S. industrial economy in the early twentieth century.

Depending largely on government acreage allotment, conservation, marketing, and loan and deficiency payment programs, which adjusted incentives annually to control production, between 2.5 and 3.5 million acres of U.S. farmland have been used for rice cultivation annually. Most of this land was in Arkansas, Missouri, Mississippi, and the Mississippi River Delta in Louisiana. Other major rice farming centers were in Texas and California, with Florida adding marginally to the total crop.

Because of its capital-intensive nature and its extensive use of irrigation and canal systems, the rice industry was naturally aligned to the technological progress of the Industrial Revolution and was modernized much faster than the cotton and sugar industries. In addition, the industry's development of a coordinated network among its various milling interests, distributors, and broker/agents was a useful organizational model for other Southern agricultural industries. The modern rice industry concentrates far more on distribution and marketing channels than on production.

With a growing year from August to July, modern rice production has been aided by the use of land plans that till and level the soil, creating fields that slope slightly for uniform flooding and controlled draining. Rice farmers also have relied on lasers to determine where to place water control levees. Sowing has been facilitated by the use of seed drills and airplanes in the early spring. During the growing season, rice must be kept constantly in a water depth of two to three inches. Rice farmers also apply fertilizer from airplanes for consistent and healthy crops. The fields are drained after the rice matures. At harvest time, farmers use combines to cut rice, separate the grain from the stalk, and transfer the grain into trucks. The trucks then transport the grain to dryers where warm air removes moisture until the product is ready for shipment to rice mills.

The primary uses for domestic consumption of rice include direct food, processed food, beer, and pet food. Direct food use has constituted the largest segment of rice consumption. Processed food use traditionally accounted for 25 percent of total domestic rice consumption. In this market, cereals used the most rice, making up nearly half of the processed food division. Other noteworthy processed foods containing rice include candy bars, soups, and crackers. Since the mid-1990s, beer production consistently has represented 16 percent of total domestic consumption of rice. By 2008, 53 percent of domestic rice used went to direct food use, 16 percent to processed food use, 15 percent to beer, and 14 percent to pet food use, with the remaining 2 percent to other industrial uses. Per capita consumption totaled 25 pounds per year (28 pounds including pet food).

During the 1980s, Latin America became the largest customer for U.S. rice, but lower prices and proximity favored Thailand and other exporting countries in the competitive European, North African, and Asian markets. As Americans became increasingly health conscious in the 1980s, domestic rice consumption began to rise. Use of rice in processed foods such as cereals and candy also contributed to the increased consumption of rice. Breweries also used rice consistently as a cereal adjunct for making beer. By 1991, domestic use had actually overtaken exports as a proportion of total annual rice production. In 1995, domestic per capita rice consumption climbed to its all-time high of nearly 25 pounds per capita, which was up almost 10 pounds from 1985 levels. With stiff competition worldwide from less expensive rice, U.S. rice producers began to concentrate increasingly on national demand. With domestic prices often higher than international prices, the United States was characterized by competitors as a residual rice exporter.

As legislation related to rice became increasingly crucial, the USA Rice Federation, comprised of charter members USA Rice Producers' Group, USA Rice Millers' Association, USA Rice Council, and USA Rice Merchants' Association, was formed in 1994. The USA Rice Federation represents the industry and leads policy-making, research, education, and efficiency initiatives as well as endeavors to benefit all industry segments. In 1996, President Clinton signed the long-anticipated landmark Federal Agriculture Improvement and Reform Act, also called the "Freedom to Farm" bill, which called for the incremental reduction of farm subsidies over a seven year period, after which government income support would completely end. Previously, the government had issued subsidies to producers who agreed not to overplant rice and other grains. With this legislation, the government paid subsidies to farmers whether or not they planted anything for the seven year transition period.

Rice producers confronted the intended transition from government income support to becoming independent by devoting increased attention and effort to advancing rice production technology and efficiency. For example, they developed methods for yielding larger crops with less effort and using less acreage. Rice producers hoped these moves would stabilize the volatility of future farming and counteract losses incurred from the loss and diminution of farm subsidies.

During the late 1990s, rice production efficiency continued to increase. The 1998 growing year, although not as productive as 1997, yielded almost 5,900 pounds per acre. With surplus supplies of rice and low domestic prices, U.S. rice exports increased to 85.2 million hundredweight (cwt) in 1998.

The trend of market dependence that began in the early 1990s shifted direction in the early twenty-first century with the passage of the Farm Security and Rural Investment Act of 2002, also called the 2002 Farm Act. Prior to this legislation, government assistance to rice farmers gradually decreased in an effort to wean rice farmers from government subsidies and safety nets, making them more market dependent. This legislation gave rice farmers, along with feed grain, upland cotton, wheat, and oilseed farmers access to marketing loans, as well as direct and counter-cyclical payments, according to the USDA. Signed on May 13, 2002, this legislation was effective for six years. When it expired, the legislation was replaced by the Food, Conservation, and Energy Act of 2008, which was passed by an override of a presidential veto in May of that year. According to a June 2008 CQ Today article, "In addition to reauthorizing crop subsidies, the new farm law tightens income eligibility limits for payments, boosts funding for food stamps, expands conservation programs, and offers new incentives for alternative energy."

The USDA reported that 2.9 million acres of rice were harvested in the United States in 2008, with a yield of 6,846 pounds per acre. In comparison to the previous year, acres harvested went up (from 2.7 million acres) but yield went down (from 7,219 pounds per acre). Production for 2008 reached 203.7 million cwt for a total value of $3.4 billion. Rice was harvested in six states, with Arkansas accounting for 92.9 million cwt, or 46 percent of production. Following Arkansas was California (43.0 million cwt), Louisiana (27.0 million cwt), Mississippi (15.6 million cwt), Missouri, (13.1 million cwt), and Texas (11.8 million cwt). Regarding types of rice, long-grain accounted for most of production, with 153.2 million cwt of the total 203.7 million cwt. Medium-grain comprised 47.1 million cwt, and short-grain, which was grown mainly in Arkansas and California, accounted for a mere 3.3 million cwt.

Trading prices for rice tripled between November 2007 and April 2008, and in spring 2008, rice prices worldwide rose to record highs, hitting $948 per ton. According to the USDA, the price increase "was not due to crop failure or a particularly tight global rice supply situation. Instead, trade restrictions by major suppliers, panic buying by several large importers, a weak dollar, and record oil prices were the immediate cause of the rise in rice prices." The increase in price was seen as detrimental to more than half of the world's population that relies on rice as a primary staple in their diet. By May 2009, rice prices had dropped more than 40 percent from their April 2008 highs, although they remained well above pre-2007 levels.

According to the USDA, U.S. rice farming is a high-cost, high-yielding, large-scale operation that relies on international trade for half its revenues. In the late years of the first decade of the 2000s, U.S. rice farmers faced rising production costs and continued strong competition in many international markets from lower cost Asian exporters. However, domestic demand for rice and per capita consumption of rice was increasing due to its health benefits as advertised by organizations such as the USA Rice Federation.

Current Conditions

Rice prices began to decline in 2009-10 due to the sluggish economy and as the world rice market eased away from the near-panic prices of 2008-09. The United States faced increased domestic competition as imports rose to record levels, primarily driven by increased demand for fragrant rice (also known as Jasmine) from Thailand. Imports totaled 700,000 cwt in 2008-09. In response, U.S. growers began offering their own version of fragrant rice, Jazzman, in an attempt draw consumers' attention to domestic production.

According to estimates by the USDA's Economic Research Service, total acres of U.S. rice planted during the 2010-11 season will reach 3.41 million acres, up 9 percent from a year earlier and the third highest on record. Long grain rice is expected to account for all growth, and Arkansas is expected to lead all states in growth, accounting for approximately 50 percent of the increase in acres planted. Domestic consumption and use of rice is also expected to be at record levels in 2010-11. Total use is expected to be 239 million cwt, up almost 8 percent over 2009-10.

In the late years of the first decade of the 2000s and early years of the 2010s, the trend in U.S. rice production was away from long grain rice and toward medium/short grains. For example, in 2009, Louisiana increased acres devoted to medium grade rice by 267 percent. Long grain varieties continued to dominate U.S. production in 2010, however, accounting for 69.5 percent of all rice production, followed by medium grain (28.8 percent) and short grain (1.7 percent). In addition, California continued to dominate in terms of quality and price for medium grain rice. Carl Brothers, senior vice president of Riceland Foods, Inc., told Western Farm Press, "They've got a better product than we have . . . I really hate to say that, but if you compare the California Calrose with the Southern medium-grains being produced, there is a big difference."

As prices began to stabilize during the 2009-10 and 2010-11 seasons, the U.S. rice industry continued to hold its global position although industry insiders cautioned that competition was increasing from within the Asian markets. Brothers noted in his April 2010 comments to Western Farm Press, "No one stands still, and we've got to keep getting better; keep increasing our yields, lowering our costs, doing everything we can to stay competitive. The Asians are after our business and we're going to have to fight as we go along." He continued, "The numbers that I see from the rice industry look very promising for continuing to grow rice, protecting our infrastructure, and employing people."

In 2010, the leading rice-producing states were Arkansas ($1.33 billion value of production), California ($889 million), Louisiana ($368 million), Mississippi ($208 million), and Missouri ($176 million). Rice yields improved significantly throughout the last decades. In 1980, yields were approximately 4,500 pounds per acre; by the early 2010s, yields topped 7,000 pounds per acre.

America and the World

In 2010, U.S. rice production accounted for approximately 2 percent of the world total, with annual sales regularly exceeding $1 billion. As late as 1980, the United States was the world's largest exporter of rice; however, in 2010, the United States was the fourth largest exporter behind Thailand, Vietnam, and Pakistan, and accounted for about 11 percent of the world's total rice exports. The United States' top export markets include Mexico, Central America, Iraq, Japan, Haiti, and Canada.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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