EU, Cuban regulations a threat to US rice: Study

Rice exports from the US in marketing year 2006-07 (July-June) are likely to be threatened by the continuing ban on imports by the European Union coupled with trade regulations in the Cuban market, according to a report published by Rabobank.

Besides, number of global and local challenges like higher fuel and fertiliser costs, rise in competitive pressure from low-cost Asian rice, and 2007 US Farm Bill are likely to add to worries of the sector, the report said.

In August 2006, EU banned long-grain rice imports from the US after they were found contaminated with traces of genetically modified grain; also, Cuba has quantitative restrictions on food imports from the US. EU accounts for 10 per cent of the US long-grain rice exports.

Rice output in the US is forecast to fall 13 per cent from a year ago to 8.8 million tonnes 2006-07 marketing year, on the back of a nine-year low rice acreage of 1.1 million hectares, owing to higher cost of fertilisers and fuel, Rabobank said.

The acreage is expected to decline further in 2007-08 owing to high prices for other crops such as soybean and corn, and non-availability of rice seed, which could produce exportable rice.

Although producing only around 1.5 per cent of the world's rice, the US accounts for as much as 12 per cent of international rice trade.

The proposed cap on payments to rice farms in the 2007-Farm Bill would lead to decline in rice acreage and rise in prices, according to a study conducted by the Food and Agricultural Policy Research Institute of the US.

In 2006-07, overall US rice exports are forecast to fall to a five-year low of 4.6 million tonnes owing to 22 per cent fall in milled rice exports to 2.9 million tonnes.

Tighter local supplies, increase in price difference with Asian competitors and GM contamination issues are the factors to blame for falling exports, Rabobank said.

GM contamination issue has also restricted or held exports to other countries such as Japan, South Korea, Mexico, Iraq, and Philippines among others. Due to low-cost operations in Asian countries, the price difference between US rice and similar grades from Thailand almost tripled to $115 per 1 tn in late 2006, according to the Rabobank data.

The situation may lead to big rise in yearend stocks adding downward pressure on US rice prices.