II.   Rice Production in the World and in the U.S.
(continued)

 

 

TERMS AND CONVERSIONS

World Production of Rice
U.S. Production of Rice
Farming of Rice
Storage and Milling of Rice
The U.S. Rice Milling Industry
  • Most production figures related to paddy or rough rice. (Rice that still contains the husk).

  • Most demand figures relate to milled rice. Milled rice is about 68% of paddy.

  • Most U.S. figures use cwts (hundred weights, 100 lbs). Large numbers are reported as 1000 cwts.

  • World figures use Metric Tons. 1 MT = 2204 lbs or 22.046 cwts. Large numbers are one million MT.

NOTE: Check in another section of Rice 101 for definitions of grain types, parboiled rice, broken rice, paddy rice, etc.

 

The Structure of the U.S. Rice Milling Industry.

The U.S. rice industry is divided into two distinctly different growing areas. "The South" and "California". The south is somewhat divided into three areas:

The largest growing area in the South, Arkansas, is dominated by two large rice cooperatives. Riceland Foods handles approximately 32,000,000 cwts of paddy rice and Producers Rice Mill handles about 16,000,000 cwts of paddy rice. Both handle some southern medium grain rice, but primarily handle long grain rice. Both have parboiling facilities. In Greenville, Mississippi there is a large facility, currently owned by AC Humco, that handles about 7,000,000 cwts of paddy rice. This facility has a capacity of about 10,000,000 (white and parboiling). It was originally built by Pirmi (of California) and then owned and operated by Comet Rice and then Cargil before being acquired by AC Humco in 1998. Also in Greenville, is an Uncle Benís parboiling facility that handles about 5,000,000 cwts of paddy. In Missouri, Louis Dreyfus owns a white mill that probably handles about 6,000,000 cwts of paddy. These six players dominate the Arkansas, Mississippi, and Missouri growing regions. The industry has seen a lot of consolidation over the years in this area and most small milling operations have gone away.

In Texas, rice acreage is shrinking and several mills have closed down over the last two years. ARIís facility is dockside in Freeport, Texas and handles about 10,000,000 cwts of paddy and is the only large mill left in the State. ARI processes more paddy for parboiling than white and receives much of its paddy rice by river barge from Arkansas and Mississippi.

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Louisiana still handles much of its rice "the old fashion way" through small family owned rice mills. There is no large mill in Louisiana.

There was no mention of Riviana Foods in the above milling section (probably one of the better known rice milling companies because of its number one "Mahatma" brand of rice). Over the years, Riviana has focused on marketing rice and has de-emphasized its milling operations. Today they still have facilities in Louisiana and Arkansas, but they are no longer a major miller of rice and much of their milled rice needs are supplied by other millers.

In the south, most of the paddy rice is still bought and sold in a free market. With the exception of cooperative farmers, most farmers have not committed their crop at planting time. They sell their rice to the highest bidder at the time that they feel is appropriate. In Louisiana and Texas, there are many sales offices where growers bring samples of their paddy rice and different milling companies made bids on the rice during sale days. These offices exist in Arkansas and Mississippi, but much of the rice there is sold over the phone or kitchen table to rice buyers for the different mills.

In general milling capacity in the south is in balance with supply. In the last two years several mills have shut down and parboiling capacity is actually tight. White milling capacity is in line with supply.

The milling industry in California has gone through dramatic changes over the last 20 years and continues to do so. The fall of Rice Grower Cooperative in the late 1980ís created tremendous changes. The entrance of Japan into the market and the bankruptcy of ARI created great changes in the last few years. Two new mills are now under construction, and the year 2001 will bring new changes.

20 years ago, California was totally dominated by two large Cooperatives. Rice Growerís Cooperative (RGA) controlled over 60 percent of the industry and together with Farmers Rice Cooperative, coops controlled over 85% of the paddy in California. This coop mentality still dominates in California today and less than 20 percent of the paddy rice is sold in a free market. Most growers contract their rice with a miller or paddy pool at planting without knowing the price that they will receive until the end of the crop year. In most cases they are contracting with private companies, but they are paid as if they were members of a coop.

These contractual relationships or groupings of farmers are called paddy pools. Farmers Rice Coop is a big paddy pool. Every mill hopes to have a paddy pool of some size. Some pools are independent of mills. The farmer is intrusting his rice (with some minimum guarantees or upfront cash) to the operator of the pool. They wait until the crop is sold to learn what they will get as final payment for their rice.

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Today, RGA is an insignificant player in the California industry and Cooperatives control less than 30% of the paddy rice. Farmers Rice Coop today controls about 10,000,000 cwts of paddy rice. Pirmi (Anheuser Busch) also controls about 8,000,000 cwts of paddy rice. California Pacific Growers controls about 4,500,000 cwts of paddy. The new Sunwest Mill currently under construction will control 3,000,000 to 4,000,000 cwts. Only a few years ago ARI controlled 6,000,000 to 8,000,000 cwts, but this collection of paddy has now been fragmented into several different pools of rice. Four to five years ago most paddy was controlled in five to six pools of rice and all were associated with a rice mill. It was rare to have a pool of rice like the ARMCO pool or SunWest pool where the pool did not own a rice mill. But even these pools, had contractual relationships with rice mills. In the last two years over a dozen new pools of paddy rice have started up in California. Traders like Connell Rice and Sugar, Cargil, ADM, and Dreyfus have started paddy pools. Several customers in Turkey have started pools. This creation of independent pools (no association with a mill) has developed because export markets now exist for paddy and over capacity in the milling industry (and ARIís loss of its paddy pool) makes it easy for pool operators to arrange toll milling at very competitive prices.

The milling industry in California has put itself in a very precarious position. In the last several years, Japan has become the most important customer of California rice and Japan takes all of its requirements in the first 6 months of the crop year. With about a third of the rice going to Japan, this means that over two thirds of all the paddy rice in California must be milled and shipped in the first 6 months of the year. Three to four years ago, the milling industry had a capacity of about 50,000,000 cwts per year and could barely handle this shipping schedule. With the additions of the last few years, and now with construction planned for 2001, the industry will have over 70,000,000 cwts of capacity. All of this capacity is in relatively new modern facilities. For the first six months of the year, the milling industry will be running at about three quarters capacity, and then for the rest of the year at one third capacity or less.

Unlike the south, where the milling industry has consolidated into large facilities, California is seeing a resurgence in small mills. These are usually small high quality facilities designed to handle niche type products. Many were built for the high quality Japanese SBS market (different from the large commodity MA business) and growing high quality domestic market. Farmers are growing more specialty varieties like mochi rice, aromatic rice, akita komochi, koshi hikari , and wild rice. Unfortunately there are real concerns as to whether Japan will continue to take high quality rice from the U.S. through the SBS system.

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