Bill Huffman
Director - Governmental Affairs

September 19, 2008

It is great to be back from vacation.  This is an update on activities and events affecting the California rice industry.

Japan Suspend Imports of All Foreign Rice

The Japanese Ministry of Agriculture, Forestry and Fisheries (MAFF) announced an immediate suspension of all rice imports yesterday (September 18th) in response to a widening problem of contamination of some of the rice or rice products imported from various foreign suppliers. 

According to press reports, MAFF is reviewing its food safety policy on imported rice following the detection of an insecticide (methamidophos) in processed food products produced from Vietnamese rice. A large quantity of this rice was reportedly sold for food use to other distributors by a Japanese company that apparently originally acquired the rice from Vietnam under Japan’s rice import program.

Additionally, MAFF also revealed that other chemicals which are not supposed to be found in rice as well as aflatoxin, a mycotoxin produced from a fungus that can infect certain grains, have been found and that residual levels exceeded Japanese food safety standards.

We understand this import ban reportedly also has been extended to wheat and barley.

Ichiro Kubota, an official with the MAFF Food Trade Division, said banned chemicals were also detected on Chinese rice in addition to the rice imported from Vietnam. He said “white rice imported from the U.S. and Thai rice was free from contamination”. Mr. Kubota also said that “in addition to tougher inspections and labeling, that a new MAFF policy might require that, for example, U.S. rice be labeled as “U.S.”, which would differentiate the product from other imports.

Japan is obligated to import 770,000 tons of rice annually under their World Trade Organization minimum access requirement. Mr. Kubota inferred that Japan still plans to import this quantity of rice this fiscal year.

Even though Japan has put an immediate ban on rice imports, we expect they will resume their imports after they sort through this issue and refine their food safety inspections to assure Japanese consumers that future rice and grain imports are free of contaminants.

August 1 Crop Report

USDA’s National Agriculture Statistics Service (NASS) recently released their August 1 rice crop acreage and production report.  NASS forecasts the total U.S. rice crop at 207 million cwts, 5% more than last year.  We should point out, however, that this does not take into account the recent hurricane damage to the Southern U.S. rice crop. We’re hearing that there seems to be a problem with shattering with the new hybrid rice varieties in the south with some reports of yield losses approaching 50% in some fields. Louisiana, Texas and parts of Arkansas and Missouri were hit hard by the hurricanes or remnants of the hurricanes and the extent of the damage won’t by known until the entire crop is harvested.

As for California, NASS forecasts the crop to be 40.3 million cwts, 8% below last year.  They used 517,000 acres and a yield estimate of 78 cwts in making their forecast.

Rough rice stocks in California, by the way, were only 5.75 million cwts on August 1, down 22% from a year ago. When you consider millings in August and September, we do not expect much old crop carryover into the new marketing year.

Washington, D.C. Update

The hurricanes and the economy have dominated much of the news nationally. Congress has been in session this past week and is scheduled to be in session through the end of next week and then adjourn to go home to work on being reelected.

There are two issues that are developing that we are watching closely. Both have to do with the implementation of the 2008 Farm Bill. 

The first has to do with implementing the new ACRE revenue assurance program contained in the 2008 bill. That is the program promoted by the National Farmers Union, the National Corn Growers and the American Farm Land Trust and others that would replace the traditional farm payment program if growers elected to sign up and give up 20% of their direct payment, 30% of their loan rate and eliminate their counter-cyclical payment in exchange for a revenue assurance. USDA appears to be leaning toward using the 2006 and 2007 crop years as the basis for establishing the crop values to be used for implementing the ACRE revenue assurance program. Several members of Congress and certain commodity groups are pushing USDA to use 2007 and 2008 crop values, which would substantially raise the 2-year average season price for such commodities as corn and soybeans resulting in much larger revenue assurance values for producers who elect to participate. For corn, using 2007-2008 prices would raise the revenue assurance payout to growers by about $200 per acre and for soybeans it would raise payouts by about $135 per acre. 

The problem with all of this is that by using the much higher 2008 crop prices to establish this program, it likely will cost about $10 billion more than the 2008 Farm Bill allotted.  In these times of rather high Federal deficits, that is significant. We expect a major battle will develop between the Bush Administration and the Democratic controlled Congress over this issue.

The second issue involves implementation of the new permanent agriculture disaster program contained in the 2008 Farm Bill. Growers affected by flooding in the Midwest and by the hurricanes in the South are pushing USDA through their local Congressmen to get this program implemented sooner rather than later. When the farm bill was passed, the program was supposed to be implemented in 2009. This is another issue that will likely become another battle between Congress and the Bush Administration.

The California Rice Harvest

It appears that the California rice harvest is slower than what one might expect. Moisture levels are hovering in the 22-24% range; many growers are waiting for moisture levels to drop to the range of 20% to avoid higher drying costs.  Joe Alves reports that FRC-Stegeman is receiving 30-35 loads per day and FRC-West Sacramento is averaging 50 loads per day. Overall, Joe says the harvest is 10-days later than normal.