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U.S. farmers profit little from high rice prices

Dipping its left wing, a canary-yellow biplane makes a sharp turn and dives over a flooded field, showering rice on the shallow water fifteen feet below.
Image: Juan Vasquez levels out rice seed stored at the DePue Warehouse Co. near Maxwell, Calif.
Juan Vasquez levels out rice seed stored at the DePue Warehouse Co. near Maxwell, Calif.Rich Pedroncelli / AP
/ Source: The Associated Press

Dipping its left wing, a canary-yellow biplane makes a sharp turn and dives over a flooded field, showering rice on the shallow water fifteen feet below.

It's aerial seeding season for rice farmers in California, which produces about 20 percent of the crop grown in the U.S. With the price of rice surging internationally, much of the medium-grain rice being planted between the Sutter Butte mountains and California's Coastal Range has already being sold, even though harvest still is months away.

"It's nuts," said Pat Daddow, head of the California Rice Exchange, a platform where processors bid on and buy rice. "We've sold an ungodly amount of rice, the price has nearly doubled — and this is the crop they're just beginning to plant."

The greater demand and new foreign customers driving the global price hike have been a boon to American farmers, who are welcoming the reprieve after years of shouldering high fuel and fertilizer costs and weak prices for their grain.

Commodity traders and economists attribute the global price increases to everything from weather — a drought in Australia, floods in Asia — to the declining value of the dollar, the jump in fuel costs and increased buying power in countries like China and India, said Nathan Childs, an economist and rice expert with the U.S. Department of Agriculture.

The cyclone that ravaged Myanmar more than a week ago, killing tens of thousands and displacing many more, also devastated the impoverished country's rice-growing heartland. The country, also known as Burma, had produced enough to feed itself, and was expected to export up to 600,000 tons of rice to neighbors including Sri Lanka and Bangladesh this year.

But one of the main factors pushing up prices this month is a peculiarity of the rice market. Although rice — as in Middle Eastern pilaf, Asian rice bowls, or Latin American beans and rice — is a staple around the world, less than 8 percent of the global crop is traded internationally. Most of it is eaten less than 60 miles from where it's grown.

That means that when some of the largest producers — among them India, Vietnam, China, and Brazil — curtail exports to protect prices at home, the international marketplace reels and prices for imported varieties soar, Childs said.

"A thinly traded market will be more volatile, easily shaken up," Childs said.

The most expensive rice varieties — the ones known in the trade as aromatics — can't be grown in the U.S. But with imported types such as such as Thai jasmine and Indian basmati selling for $1,000 and $2,000 a ton, respectively, farmers here are still reaping profits.

California's cooler weather produces mostly medium- and short-grain rice varieties, the moist, sticky kinds favored for sushi or risotto. With some of its main competitors out of the market — Australia due to a long drought, Egypt because of a decision to cut back on exports — the price of medium-grain rice rose from $551 per ton in April 2007 to $750 per ton a year later.

The long-grain varieties that grow better in the warmer climates of Arkansas, Mississippi and Louisiana went from $397 a ton in April 2007 to $794 a year later as competitors such as India and Brazil also pulled back from the international market.

So even though the global crop is larger than ever, and U.S. production is strong, third-generation California rice farmer Zachary Dennis will get a good deal for the grain he's planting right now.

"This is probably the first year in a while that we'll do more than break even," Dennis said as rice from the biplane seeding his fields pelts the cab of his truck.

And it'll come just in time to pull him and other growers out of the red, where they've been plunged by escalating fuel and fertilizer prices, he said.

Mississippi rice farmer Gary Fioranelli, chairman of the U.S. Rice Producers Association, said rice prices had been so low since 2000 that the state's farmers had started switching to corn and soybeans, reducing rice acreage from a peak of 250,000 acres to 190,000 this year.

The recent lurch in prices might help some of the growers who have remained, he said.

"The machines we use are really expensive, and the gas prices," he said, stopping his tractor to explain the economics of his business over his cell phone. "It'll take these good prices to just stay even."

Complaints about the high price of oil are a common refrain among rice farmers, who generally run large, high-cost, high-yield operations that stand in contrast to the traditional, labor-intensive methods still used in parts of Asia, where farmers wade into rice paddies to transplant shoots then harvest with hand-held sickles.

U.S. rice fields are bigger on average than soy, corn or wheat farms, and rely heavily on expensive, gas-guzzling machinery, from the John Deere tractor pulling a 21-foot-wide disking attachment to prepare another parcel of Dennis' land for planting to the buzzing aircraft above.

Fuel for the biplanes rose from last year's price of $2.30 a gallon when bought in bulk to $3.50 this year — a 52 percent increase, explained Rick Richter, who owns and flies the Ag Cat used to seed Dennis' fields.

"You know how many gallons this burns?" Richter asked, talking above the roar of the motor. "Fifty an hour. I have to pass that cost on — there's no way I can take it."

Dennis tries to keep down fuel costs by using GPS devices to guide his tractors and the aircraft during seeding.

Despite the higher prices, farmers in Arkansas, which produces nearly half the rice grown in the U.S., aren't seeing huge profits, said Greg Yielding, executive director of the Arkansas Rice Growers Association.

"It's not a windfall, because input costs — for fuel, fertilizer — are higher than they've ever been," he said.

Even though growers are welcoming the news, hoping to cover bills and make overdue improvements, some in the business are nervous.

"The thing that's scary is this volatility," said Daddow. "I'm happy, excited that rice is trading at these values, but it just keeps me on edge."