Rice Farming

Although commodity prices are at their lowest ebb since 1987, Rome Helton is cutting every possible expense to keep his profitability up.

Helton, who farms 1,200 acres of rice along with wheat and soybeans in Wynne, Ark., tries to offset the shortfall by hiring fewer workers and turning capital expenditures to his advantage.

No matter how bad prices are, Helton regularly buys state-of-the-art equipment. To help pay for it, he custom plants for his neighbors and reinvests what he earns in capital purchases.

“It's just watching your pennies,” he says. “There are 3,500 acres, there's me, three full-time helpers and two part-time, and we used to run six people on 2,000 acres five years ago. It's just trying to do more with less.”

Texas A & M University economist David Anderson says strategies like Helton’s can mean the difference between getting by and getting ahead.

“What it all boils down to is farmers have to be even better marketers than ever,” he says. “They have to figure out how to improve profitability of their operation, which involves knowing where to cut costs and where not to.”

To accomplish this, Helton also uses his on-farm grain storage facility to custom store rice for himself and others. The facility helps him avoid the cost of renting commercial bin space, and the custom storage generates additional income.

Prices at a glance
Economists say rice commodity prices, which hover between $3.50 to $4 cwt, are not likely to improve anytime soon unless world production shrinks or bad weather causes supply problems in a major exporting country.

“It’s pretty dismal and there are a couple of reasons why,” Anderson says. “We have large production domestically and we’re very dependent on the world market. There have been abundant supplies of rice throughout the world for the last several years. There also have been very good crops around the world overall.”

Until recently, American producers were operating in a market with a strong dollar. This prevented foreign buyers from importing U.S. rice because they would have been required to pay more just to match the lesser values of their currencies with the greater value of ours.

Lagging prices in other major rice-exporting countries in Asia have directly affected U.S. prices as well. The U.S. Department of Agriculture’s Economic Research Service (ERS) reports that large, subsidized exports from India along with recent sales of government rice stocks in Thailand have been pulling down world prices.

Thai white rice dropped by $8 per metric ton in October from the previous month. Vietnam’s white rice prices also witnessed a $5 decrease per metric ton in October. (A metric ton is about 2,200 pounds.)

Meanwhile, total U.S. rice supply for 2002-03 is projected at 263.9 million cwt—up 4 percent since last year—or record yields of 6,608 pounds per acre across most of the rice-producing states.

Sounds like a plan
Anderson and other experts agree that, although no “silver bullet” exists, producers can find ways around the market by being vigilant about every dollar they spend.

Mike Sullivan’s top priority is producing bumper crops on his family’s 3,300 rice acres in Burdette, Ark.
“It takes a high yield and watching your input costs,” Sullivan says. “We’re just trying to cut costs everywhere we can without doing anything to sacrifice yield. That’s the only variable we have a whole lot of control over.”

The Sullivans also grow corn, wheat and soybeans to help stabilize their income.

Since some obvious input costs such as seed are unavoidable, Anderson suggests concentrating on the things that can be trimmed without causing problems.

He reminds producers that initially spending more on per-acre inputs such as fertilizer or intensive management often means bigger yields at harvest and might be an investment worth considering. He says he has seen producers in his area reap yields of 10,000 to 11,000 pounds per acre because they didn’t skimp on input costs.

As for trying to lock down better prices in the futures market, Anderson and Sullivan stress there’s not much to be gained from it because prices are so low. But even a little bit helps in tight times, Anderson says.
“Farmers don’t have the finances to play the market,” says Ronnie Levy, Louisiana State University Cooperative Extension agent in Acadia Parish. “When you play the market, you have to have the money to be able to lose. They can’t risk anything and banks won’t allow them the risk.”

Sullivan pools his rice through a cooperative, which markets his crop throughout the fiscal year and pays him in three installments. He says this approach helps because the cooperative knows exactly how and where to market his crop, and can help spread his risk over changes in price.

And Sullivan believes in big yields because no matter how low the prices or how overabundant the rice, a bumper crop always pays the bills.

Louisiana fights to stay ahead
While producers like Helton and Sullivan enjoy a diversity of crops to help carry them through, farmers in Louisiana wonder how they’ll break even—or if they’ll ever farm again.

Louisiana’s silt loam soil doesn’t support many other crops besides rice, so little opportunity exists for farmers who wish to diversify. The state’s historical yields are also low and margins thin, according to Louisiana State University AgCenter economist Gene Johnson.

When producers ask Johnson for advice, he says there aren’t many options because prices have sunk below production costs. But if the market spikes—something he doesn’t foresee—Johnson encourages them to take advantage of it.

“Everybody has a different situation,” Johnson says. “I can't make a generalized statement except the fact that I think the rice prices are too low, I don't see a chance for a lot of improvement, we have abundant supplies in the world and this is just a fact of life."

Because of the precarious position they find themselves in, several Louisiana producers managed to help formulate legislation recently for federal emergency assistance, despite the 2002 Farm Security and Rural Investment Act’s countercyclical payment component. Instead of waiting for these supplemental payments to cycle around to them next year, farmers want the money now to survive until next year.

Jackie Loewer, a Louisiana producer who farms 1,500 acres of rice and another 1,500 acres of soybeans with his two brothers, participated in the push for emergency aid.

He says prices always dip around harvest time, so he’s not panicked. He’s simply watching to see what happens and will probably start marketing this year’s rice crop late this month or early next month.
“I always say we take money to make rice so we can take rice to make money, and what happens is that the rice to make money is not as much money as we’ve taken to make rice,” Loewer says.

Contact Lindsay Jones at (901) 767-4020 or ljones@vancepublishing.com.

Show me the money You can survive the bear market by trimming production costs
By Lindsay Jones Production Editor
Although commodity prices are at their lowest ebb since 1987, Rome Helton is cutting every possible expense to keep his profitability up. Helton, who farms 1,200 acres of rice along with wheat and soybeans in Wynne, Ark., tries to offset the shortfall by hiring fewer workers and turning capital expenditures to his advantage. No matter how bad prices are, Helton regularly buys state-of-the-art equipment. To help pay for it, he custom plants for his neighbors and reinvests what he earns in capital purchases. “It's just watching your pennies,” he says. “There are 3,500 acres, there's me, three full-time helpers and two part-time, and we used to run six people on 2,000 acres five years ago. It's just trying to do more with less.” Texas A & M University economist David Anderson says strategies like Helton’s can mean the difference between getting by and getting ahead. “What it all boils down to is farmers have to be even better marketers than ever,” he says. “They have to figure out how to improve profitability of their operation, which involves knowing where to cut costs and where not to.” To accomplish this, Helton also uses his on-farm grain storage facility to custom store rice for himself and others. The facility helps him avoid the cost of renting commercial bin space, and the custom storage generates additional income. Prices at a glance Economists say rice commodity prices, which hover between $3.50 to $4 cwt, are not likely to improve anytime soon unless world production shrinks or bad weather causes supply problems in a major exporting country. “It’s pretty dismal and there are a couple of reasons why,” Anderson says. “We have large production domestically and we’re very dependent on the world market. There have been abundant supplies of rice throughout the world for the last several years. There also have been very good crops around the world overall.” Until recently, American producers were operating in a market with a strong dollar. This prevented foreign buyers from importing U.S. rice because they would have been required to pay more just to match the lesser values of their currencies with the greater value of ours. Lagging prices in other major rice-exporting countries in Asia have directly affected U.S. prices as well. The U.S. Department of Agriculture’s Economic Research Service (ERS) reports that large, subsidized exports from India along with recent sales of government rice stocks in Thailand have been pulling down world prices. Thai white rice dropped by $8 per metric ton in October from the previous month. Vietnam’s white rice prices also witnessed a $5 decrease per metric ton in October. (A metric ton is about 2,200 pounds.) Meanwhile, total U.S. rice supply for 2002-03 is projected at 263.9 million cwt—up 4 percent since last year—or record yields of 6,608 pounds per acre across most of the rice-producing states. Sounds like a plan Anderson and other experts agree that, although no “silver bullet” exists, producers can find ways around the market by being vigilant about every dollar they spend. Mike Sullivan’s top priority is producing bumper crops on his family’s 3,300 rice acres in Burdette, Ark. “It takes a high yield and watching your input costs,” Sullivan says. “We’re just trying to cut costs everywhere we can without doing anything to sacrifice yield. That’s the only variable we have a whole lot of control over.” The Sullivans also grow corn, wheat and soybeans to help stabilize their income. Since some obvious input costs such as seed are unavoidable, Anderson suggests concentrating on the things that can be trimmed without causing problems. He reminds producers that initially spending more on per-acre inputs such as fertilizer or intensive management often means bigger yields at harvest and might be an investment worth considering. He says he has seen producers in his area reap yields of 10,000 to 11,000 pounds per acre because they didn’t skimp on input costs. As for trying to lock down better prices in the futures market, Anderson and Sullivan stress there’s not much to be gained from it because prices are so low. But even a little bit helps in tight times, Anderson says. “Farmers don’t have the finances to play the market,” says Ronnie Levy, Louisiana State University Cooperative Extension agent in Acadia Parish. “When you play the market, you have to have the money to be able to lose. They can’t risk anything and banks won’t allow them the risk.” Sullivan pools his rice through a cooperative, which markets his crop throughout the fiscal year and pays him in three installments. He says this approach helps because the cooperative knows exactly how and where to market his crop, and can help spread his risk over changes in price. And Sullivan believes in big yields because no matter how low the prices or how overabundant the rice, a bumper crop always pays the bills. Louisiana fights to stay ahead While producers like Helton and Sullivan enjoy a diversity of crops to help carry them through, farmers in Louisiana wonder how they’ll break even—or if they’ll ever farm again. Louisiana’s silt loam soil doesn’t support many other crops besides rice, so little opportunity exists for farmers who wish to diversify. The state’s historical yields are also low and margins thin, according to Louisiana State University AgCenter economist Gene Johnson. When producers ask Johnson for advice, he says there aren’t many options because prices have sunk below production costs. But if the market spikes—something he doesn’t foresee—Johnson encourages them to take advantage of it. “Everybody has a different situation,” Johnson says. “I can't make a generalized statement except the fact that I think the rice prices are too low, I don't see a chance for a lot of improvement, we have abundant supplies in the world and this is just a fact of life." Because of the precarious position they find themselves in, several Louisiana producers managed to help formulate legislation recently for federal emergency assistance, despite the 2002 Farm Security and Rural Investment Act’s countercyclical payment component. Instead of waiting for these supplemental payments to cycle around to them next year, farmers want the money now to survive until next year. Jackie Loewer, a Louisiana producer who farms 1,500 acres of rice and another 1,500 acres of soybeans with his two brothers, participated in the push for emergency aid. He says prices always dip around harvest time, so he’s not panicked. He’s simply watching to see what happens and will probably start marketing this year’s rice crop late this month or early next month. “I always say we take money to make rice so we can take rice to make money, and what happens is that the rice to make money is not as much money as we’ve taken to make rice,” Loewer says. Contact Lindsay Jones at (901) 767-4020 or ljones@vancepublishing.com. .
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