The Americas have two faces

 V. Subramanian   |  
Erratic weather troubles U.S. production. (Photo: The Rice Trader)

Erratic weather troubles U.S. production.(Photo: The Rice Trader)

In 2010, the 4th The Rice Trader (TRT) Rice Americas Conference covered Brazil’s poor production caused by unexpected rains and floods in late 2009, an expected record crop in the U.S., and the effort of the Southern Common Market, or MERCOSUR region (Argentina, Brazil, Paraguay, and Uruguay in this report), to help Brazil meet its shortfall—which meant giving up market share in key African and European rice markets.

This year, however, it was the opposite. The 5th TRT Rice Americas conference in Panama revealed how the U.S. 2010 crop was eventually plagued with quality problems and how the current crop has been battered by floods around the Mississippi River and droughts in Texas in the Mid-South growing area.

Several analysts predict the worst for the expected U.S. rice output. The anticipated drop in yields caused by bad weather was aggravated by a decrease in rice area. Several farms also decided to move away from rice to plant soybeans, maize, and cotton. With these events, the TRT conference this year was not short of excitement. Delegates described quality problems seen from the imported American rice, with U.S. rice production expected to be lower, while South American production hit record highs, which could make up for the shortfall in the U.S.

Widespread risks
Conference Chairman and TRT President/CEO Jeremy Zwinger started the ball rolling with an explicit look at the risks, specifically the weather, currency, and the general state of the American and even European economies, and the well-documented turmoil that now grips the Middle East and North Africa.

“Risk has gotten more widespread,” claimed Mr. Zwinger, “with rice trading no longer just about buying and selling rice.” He said that buyers, sellers, and the broader rice supply chain are expected to face new challenges from increased risks that look set to keep global rice markets on edge. Although a good supply is available in 2011, Mr. Zwinger cited factors such as high oil prices, increasing wheat and maize prices, and a more volatile global food balance that will have an impact on rice markets. Comparing wheat, maize, and rice prices over the last 8 years, rice prices are relatively cheaper today than during the 2006-07 market years, which suggest a market imbalance that should result in lower wheat and maize prices or a higher price for rice.

Moreover, Mr. Zwinger noted that some analysts predicted a 40% reduction in the U.S. crop in 2011 because of the erratic weather in the country. Weather anomalies hit both the southern rice-growing regions and California rice belt.

Odd weather
Still on the subject of the weather, Elwyn Taylor, an extension agronomist from the Climatology and Meteorology Department of Iowa State University, revealed extensive studies on global weather patterns over a period of more than 100 years. Dr. Taylor suggested that the frequency and intensity of weather anomalies appear to be on the rise.

Needless to say, crop output would be more difficult to predict in the future. He did, however, suggest that some quick tweaks to the way analysts combine weather developments with crop analysis could also yield more accurate forecasts that could aid planning.



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