Rice Producers Hear Mixed Bag Of News; Subsidies Likely To Be Reduced But Trade Barriers May Be Lifted

Bruce Schultz  |  2/2/2006 2:46:38 AM

Speaking in Crowley last week (Jan. 26), Milo Hamilton, president of Firstgrain Inc., a rice market advisory service, told a group of bankers, crop consultants and farmers that rice prices could rise sharply this year.

News Release Distributed 02/01/06

CROWLEY – Farmers are facing uncertainty with expected changes in U.S. farm policy, high energy costs and World Trade Organization talks, a Washington agricultural analyst told rice producers last week (Jan. 26).

Jim Wiesemeyer told the annual gathering of the Louisiana Rice Council and Louisiana Rice Growers Association that $15 billion to $20 billion probably will be cut from federal farm programs in the 2007 Farm Bill – although he said he expects that bill to contain an expanded ethanol program.

Wiesemeyer, vice president for policy and trade issues for Informa Economics, said a special aid package should be made available to Louisiana farmers who suffered from storm surge that pushed harmful salt water onto their land.

He also said he is not optimistic that energy prices will decline and said they could even hit $75 a barrel for oil this year.

"We’ll have $3-a-gallon gasoline prices again this summer," Wiesemeyer predicted.

On another topic, Wiesemeyer said while WTO negotiations could result in the elimination or reduction of subsidies to U.S. farmers, such action could also have positive effects for rice farmers, because import limits imposed by other countries could be lifted.

As for the current climate, the 2002 Farm Bill has been a success for U.S. farmers, Wiesemeyer said, adding that most commodities are at their strongest positions in decades.

But Wiesemeyer doubts that President Bush will lift trade restrictions with Cuba.

"Flip the page," he said. "It’s not going to happen as long as this administration is in office."

Earlier Thursday (Jan. 26), Milo Hamilton, president of Firstgrain Inc., a rice market advisory service, told a group of bankers, crop consultants and farmers that rice prices could rise sharply this year because of reduced planting expected in several states.

"We are bullish on next year," said Hamilton, a former rice buyer for Uncle Ben’s.

Hamilton said U.S. farmers should expect government supports to be eliminated because of WTO talks, and that would clear the way to sell more rice overseas.

Rice stocks are declining worldwide, he said, and a decreased supply will result in higher prices.

The Chinese government has subsidized water for rice farmers in the northern part of China by 90 percent until last year, but that water subsidy is in the process of being removed, he said. Several other countries are facing water shortages that could lead to a reduction in rice production over the next decade, he added.

In the coming year, production in the Western Hemisphere could decline by 10 percent to 15 percent, Hamilton predicted, adding that Brazil’s crop already is down by 12 percent to 15 percent because of higher input costs and low planting prices.

Facing a similar situation here, Hamilton said predictions are that Louisiana and Texas rice farmers probably will reduce acreage by at least 10 percent or more, and he said he’s heard Arkansas could cut its acreage by 6 percent to 8 percent or more.

"It’s not so clear about Arkansas," Hamilton said. "It should not be down by as much as the Gulf Coast. It all hinges on the financial situation of farmers at planting time and the level of the rice price."

Hamilton said that rice farmers should not simply use the cash market to sell their crop but that they also should "employ rice futures and/or rice options to increase their range of marketing alternatives and improve their total returns."

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Writer: Bruce Schultz at (337) 788-8821 or bschultz@agcenter.lsu.edu

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