With little food aid: Rice mills, farmers face uneasy truths

It may not be rancorous, but the relationship between mills and rice farmers is necessarily adversarial. In a free economy, one side wants to sell for the highest price, the other wants to buy for the lowest.

“As a farmer, you sell your crop — take the hit — and move on,” says Jackie Loewer, rice producer and chair of the Louisiana Rice Producers Group. “Rarely are millers' concerns worried over by farmers.”

That's changing. Farmers — especially those in Louisiana and Texas — have recently seen a spate of mill troubles due to dire economic conditions. Over the last few months, one-fifth of U.S. mills have been put on the market, closed or gone bankrupt.

“As I understand it, millers are panicking a bit about not having enough rice to mill come fall. The government hasn't come through with food assistance, the world market is flooded and there are other things millers are worrying about,” says Loewer.

Further, Louisiana mills and farmers have a somewhat unique relationship nowadays.

Linkage important

“Even though we're not tied to mills like farmers are in California, Mississippi and Arkansas, we still understand the value they have to us. In this day of tight farm management, if you don't have a linkage both upstream and downstream you're out there like a lone ranger. You may get lucky every once in a while, but it'll catch up eventually. Collaboration between farmers and mills is a must,” says Loewer.

At this time of year, there's usually not a whole bunch of rice in the pipeline regardless. But there's plenty of foreshadowing of troubles on the rice front.

In Louisiana, “The concern is we've got a big rice crop that's due to be harvested in late July and August. The amount of business on the books currently — P.L. 480 programming, government business we've traditionally had — is very slow in developing. The P.L. 480 funding is behind schedule and we're concerned that without this business, we'll have a bunch of rice that's stranded,” says Jamie Warshaw, CEO of Farmers Rice Mill in Lake Charles.

Industrywide, normally there's about 400,000 tons of rice that goes out for P.L. 480 programming. “This year, we're looking at 200,000 tons so far. Not nearly enough,” says Warshaw.

William Dore, president of Supreme Rice Mill in Crowley pulls no punches saying the milling business is currently being, “decimated. This is the worst depression in rice milling I've ever seen.”

Dore thinks the reasons for this are three-fold. In no particular order they are:

— The embargoes against Iran, Iraq and Cuba. “At the times these embargoes were placed, these markets were the largest we had.”

— Unfair trade practices. “This is primarily true of Central and South America where they put huge tariffs on milled rice. The tariff is so high U.S. milled rice can't compete in those areas.”

— A very low amount of food aid.

Food aid awaits

Those three factors combine to make for a very unfavorable environment for rice milling. Fixing the three is entirely necessary to prevent further slippage of the rice industry, says Dore. But Dore admits that fixing any one of the three won't be easy.

As far as P.L. 480 deals, Uzbekistan and the Philippines are the only agreements currently in place. There are plenty of other countries — the former Soviet Union, Korea, Indonesia — who are typically recipients of this programming who are still waiting in the wings.

“Those countries should be in on our food aid again. High world supply has something to do with this, no doubt. But basically it comes down to moving this through USDA and Congress. We need to get this food aid ball rolling,” says Warshaw.

Uzbekistan will be getting medium grain rice out of California. The Philippines will be “a nice piece of business for Delta farmers,” says Dore. But the rice industry had a lot more than just two countries in the food aid fold at this time last year. Unfortunately, it appears food aid will stay slow for a while, he says.

What about the oft-heard excuse that the administration changeover in Washington, D.C., has a lot to do with slow food aid movement?

“I think the excuse about a new administration getting up to speed is valid to a degree. But Clinton was in office until Jan. 20. The fiscal year started on Oct. 1. There is a learning curve for a new administration — particularly in key positions. But blaming the changeover in large part for this isn't fair. Overall, it's a minor factor,” says Dore.

Of the three things Dore outlined, the food aid component will give the quickest boost to the rice industry. But, long-term, what really needs to be addressed are the embargoes and unfair trade practices, he says.

As far as Cuba, President Bush has a chance to emulate the late President Nixon's trip to China, say several millers Delta Farm Press spoke with.

“I think it's going to take a change in heart in the Bush administration to have the Cuban embargo lifted. The Cubans aren't willing to do much until we normalize trade. They call what we're doing a ‘blockade,’” says Dore.

Much of the Cuban rhetoric stems from the fact that Castro needs a whipping boy to blame his problems on. But until the United States starts treating Cuba as it does other countries, “I don't hold out much hope that their rice market will benefit U.S. industry,” says Dore.

For Bush to address the embargo on Cuba it will take statesmanship, will and energy. It will also mean expending political capital because Florida — where first brother Jeb Bush is governor — is very critical for Republicans.

‘Hurting ourselves’

“The president needs to put all that aside and do what I think is the correct thing. All our competitors are already selling rice into Cuba. We're only hurting ourselves with this embargo,” says Dore.

Loewer likens Cuba to, “a long nail you have to keep hammering on. We aren't going to knock it flush with one lick.”

Without lifting the embargoes, can the underlying problems of the U.S. rice industry be fixed?

If we lift the embargoes, the U.S. rice industry would at least have a fighting chance, say millers. Even with the embargoes lifted we'd still have to go in and fight for those markets so it won't be an overnight solution regardless. But it is a key piece of a long-term solution.

Another thing millers are seeing in the world market is an unprecedented amount of rice being sold by Thailand and Vietnam on a government-to-government basis. These governments are actually working to a large extent — much more than they've done in the past — as almost the marketing arms of their country's rice industry.

“What that means is they're willing to buy rice at a loss, buy rice domestically and sell it at a loss (many times at a huge loss), and take all credit and execution risk associated with these sales. So we're seeing much more government interference around the world in the rice markets,” says Dore.

What about the relationship between the millers and farmers? In your opinion, why is that so crucial?

“That can be answered in one word: prices. The bigger world market share we have, the better prices will be — especially from a value-added perspective,” says Dore.

If a PL 480 deal is done today, how long before it makes a difference?

“Weeks most likely,” says Dore.

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