The Economics of Rice Production

Transcription

1 The Economics of Rice Production LATMC Meeting Marksville, LA Friday, February 19, 2016 Dr. Michael Deliberto Department of Agricultural Economics & Agribusiness Louisiana State University Agricultural Center Baton Rouge, LA

2 U.S. Rice Production National Yield estimated at 74.70cwt/ac Million cwt. Million acres / / /13 Production Source: USDA NASS. 2013/14 Harvested Acres 2014/ /16

3 Total Rice Supply and Use TOTAL RICE Area Planted Area Harvested Yield per Harvested Acre Beginning Stocks Production Imports Supply, Total Domestic & Residual Exports, Total Rough Milled (rough equiv.) Use, Total Ending Stocks Avg. Milling Yield (%) Avg. Farm Price ($/cwt) Source: USDA. WASDE Report. February 9, / /15 Est. 2015/16 Proj. Feb. Million Acres Pounds 7,694 7,576 7,470 Million Hundredweight

4 LG Rice Supply and Use TOTAL RICE Area Harvested Yield per Harvested Acre Beginning Stocks Production Supply, Total Domestic & Residual Exports, Total Use, Total Ending Stocks Avg. Farm Price ($/cwt) Source: USDA. WASDE Report. February 9, / /15 Est. 2015/16 Proj. Feb. Million Acres Pounds 7,464 7,407 Million Hundredweight ,

5 Dollars per hundredweight Rice Prices, by Class $16.50 $16.00 $15.50 $15.00 $14.50 $14.00 $13.50 $13.00 $12.50 $12.00 $11.50 $11.00 $10.50 $10.00 $9.50 $9.00 $8.50 $8.00 $7.50 $7.00 $6.50 $15.70 $15.40 $14.40 $11.90 $12.00 $ /10 Source: USDA NASS. 2010/ / / / / /16 LG MG

6 Market Outlook Downward revisions to farm prices LG ($11.30) and MG ($17.10) Long grain production forecasted at M cwt Supply forecasted to be 5% lower than a year earlier Exports are 2% larger than a year ago Source: USDA. ERS. Rice Outlook. January 14, 2016 and USDA February 9, 2016 WADSE.

7 Long Grain Gross Returns/ac $1, $1, Gross Returns ($ per acre) $1, $ $ $ Estimate 69.90*$11.30= $789 $ $ $ $ $ $ Source: USDA NASS. Long Grain Acreage, Yield, Production, and Price for Louisiana

8 Milling Characteristics Milling yield interpretation base price of $12.00/cwt and a 2015 state milling average of 56/69 whole and broken price determinations (WK to BK 6.51) Conventional vs. Clearfield vs. Hybrid Variety Technology Milling Percent * Whole Price Broken Price Price Received Cocodrie $12.32 $0.95 $13.27 CL $12.32 $0.83 $13.15 CLXL $11.94 $0.95 $12.89 CLXL $12.32 $0.47 $12.79 *Source: LSU AgCenter Rice Research Station. Results of the 2014 Louisiana Rice Varity Trials. Rice Varieties and Management Tips pg. 7. Crowley, LA.

9 Budget Share of Expenses Dry 11% Represents a 10-year average share of total variable costs per acre. Custom Ops 9% Haul 3% Interest 2% Repair 4% Total variable costs ranged from $ in 2007 to $ in Fertilizer 19% Fungicides 4% Fuel 28% Herbicides Insecticides 6% 2% Labor 3% Seed 9% Custom Ops Fertilizer Fungicides Herbicides Insecticides Labor Seed Fuel Repair Interest Haul Dry CLEARFIELD variety, drill planted, southwestern Louisiana.

10 Retail Fertilizer Prices $600 $550 Dollars per ton $500 $450 Urea $400 DAP Potash $350 $300 $250 $200 11/7/14 12/27/14 2/15/15 4/6/15 5/26/15 7/15/15 9/3/15 10/23/1512/12/15 1/31/16 3/21/16 Source: AgFax. DTN Fertilizer. Fertilizer Trends. February 17, DTN collects roughly 1,700 retail fertilizer bids from 310 retailer location weekly.

11 Input Trends for Louisiana Diesel Price/gal Nitrogen Price/lb $3.75 $0.70 $3.50 $0.65 $3.25 $0.60 $3.00 $0.55 $2.75 $0.50 $2.50 $0.45 $2.25 $0.40 $2.00 $0.35 $1.75 $0.30 $1.50 $0.25 $1.25 $1.00 $0.20 $0.75 $0.15 $0.50 $0.10 $0.25 $ Diesel CLEARFIELD variety, drill planted, southwestern Louisiana N Fert

12 Production Costs per acre $ $725 $ $703 Dry $692 Dry $586 $ $ $554 Haul Interest Repair Fuel Fuel Seed $ Labor $ Seed Insecticides Herbicides Fungicides $ Fertilizer Fert. Custom $ CLEARFIELD variety, drill planted, southwestern Louisiana

13 Gulf Coast Diesel Price (Retail) This information would translate into a farm diesel approximated price per gallon of $1.41. (The Louisiana $0.45 tax is applied to the Gulf Coast region weekly $1.858 per gallon price.) Source: EIA. Weekly Gasoline and Diesel Prices. February 15, 2016.

14 Fuel Markets and Resulting Price per Gallon Source: U.S. Energy Information Administration. Petroleum & Other Liquids. This Week in Petroleum. February 3, 2016.

15 The 2014 Farm Bill Irrevocable program selection ARC or PLC PLC farm program payments Reference price of $14.00 per cwt Considers farm s program yield and the national MYA price No county (parish) level data used Paid on 85% of the crop s base acres

16 National Program Election Source: Schnitkey, G., J. Coppess, N. Paulson, and C. Zulauf. "Perspectives on Commodity Program Choices under the 2014 Farm Bill." farmdoc daily (5):111, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, June 16, 2015.

17 Program Election by State Crop ARC-CO acres PLC acres ARC-IC acres Total Base Acres Percent of Total Arkansas Corn 197,808 32, , % Rice (LG) 2,926 1,912, ,914, % Soybeans 2,221, , ,329, % Louisiana Corn 279,311 32, , % Rice (LG) 1, , , % Soybeans 461,415 43, , % Mississippi Corn 346,194 18, , % Rice (LG) 1, , , % Soybeans 935,830 11,183 1, , % Arkansas reported 1,148,575 generic acres (16.64%); Louisiana reported 995,813 (33.75%); and Mississippi reported 1,623,887 (43.00%) base acres. Source: USDA FSA. May 29, Almost all LG rice acres were enrolled in the PLC program.

18 Dollars per hundredweight Rice Prices, by Class $16.50 $16.00 $15.50 $15.00 $14.50 $14.00 $13.50 $13.00 $12.50 $12.00 $11.50 $11.00 $10.50 $10.00 $9.50 $9.00 $8.50 $8.00 $7.50 $7.00 $6.50 $15.70 $15.40 $14.40 $11.90 $12.00 LG MG $11.30 Reference Price Loan Rate 2009 Source: USDA NASS F

19 PLC Payment Calculation (LG) Parameter Measure Reference Price $14.00 per cwt 2014 LG rice MYA price $11.90 per cwt PLC payment rate PLC payment yield of farm PLC payment to farm a/ ($14.00-$11.90) = $2.10 per cwt cwt 0.85 * ($2.10*57.00) = $ a/ does not assume 6.8% sequestration reduction. The 2014 MYA price information was obtained from USDA FSA. 2015F price forecast of would trigger a PLC payment for both LG and MG rice. The estimated PLC payment rate would be $2.70 for LG (a $11.30 est. MYA price) and $1.00 per cwt for MG (a $13.00 est. MYA price). Alternatively, this can be interpreted as $1.70 and $0.85 per rice base acre.

20 PLC Payment Example (Rice) PLC PAYMENT ($ PER BASE ACRE) $ $ $ $ $ $ $ $ $ $ $ $ $97.63 $73.22 $48.82 $24.41 $ $ $ $ $ $ $ MYA Price MARKET PRICE ($/CWT) PLC example illustrated for Acadia Parish, LA. The producer elects to update payment yield on rice base to 57.4 cwt.

21 Louisiana FSA Base Acres Other 13% Cotton 35% Soybeans 17% Cotton base now termed generic. Rice 26% Corn 9% Cotton Corn Rice Soybeans Other Planted : Base Acre Ratio in Louisiana Crop Cotton Corn Rice Soybeans Source: USDA FSA. DCP/ACRE Final Enrollment Report crop years.

22 Decision Tools Available Projected costs and returns 2016 enterprise budgets Breakeven analysis Rice farm cash flow model User-specified data compatible ARC/PLC decision tool Location, crop, and user-specific Whole farm

23 NRAVC Tenant Operator CL Drill Planted, 2016 Percent 95% 100% 105% Rice Market Price ($/cwt) 80% 85% 90% 110% 115% 120% Yield (cwt.) $9.60 $10.20 $10.80 $11.40 $12.00 $12.60 $13.20 $13.80 $ % % % % % % % % % Source: Projected Costs and Returns for Rice Produced in Louisiana, 2016.

24 Rice Cash Flow Model Parameters: Unit Ratoon Crop Yields Weight PLC Program Base Acres Land Rent Irrigation (LLD) Input Prices Prices Gross Income

25 Rice Cash Flow Model (cont.) Cost Parameters: Custom Operations Drying Fertilizer Material Fungicides Herbicides Insecticides Seed Application Costs Planting Costs Hauling Labor Fuel Costs Repair (Fixed Costs) Net Returns

26 2015 Farm Program Calculator

27 Generated Program Report Parameters: Rice Price $11.30 Soybean Price $8.80 Parish: FSA Farm #1234 St. Landry Parish Farm Name Crops: Rice (PLC) and Soybeans (ARC-CO) Proj. Payment: Rice PLC $129 Soybean ARC-CO $42

28 ARC/PLC Decision Tool Comparison of the ARC and PLC Soybean Support Programs in the 2014 Farm Bill for Avoyelles Parish, LA Louisiana State University Agricultural Center - Department of Agricultural Economics and Agribusiness Step 1. Enter historical produciton data for parish and individual farm. Farm Yield Parish Yield per planted per planted acre acre Year US MYA Price $ $ $ $ $ $ Program Payment Comparison by Covered Commodity (Soybeans), Step 3. Enter the covered commodity's base acres on farm Base Acres Step 4. Comparison of the ARC and PLC Programs per base acre. ARC Payment PLC Payment Year $ Step 5. Whole farm evaluation of ARC and PLC Programs (by FSA Number). Total ARC PLC Base Payment to Acres on ARC ARC Base PLC Farm Farm Payment Acres on Farm Payment Year $ $4, $50.00 $40.00 ARC Payment $30.00 PLC Payment $20.00 $ Whole Farm Program Payment by Covered Commodity (Soybeans), $6, TOTAL PAYMENT BY PROGRAM CHOICE Step 2. Enter expected yield per planted acre and MYA price over the next five years. Parish Yield per planted PLC Payment Year acre US MYA Price Yield for Farm $ $ $ $ $ PROGRAM PAYMENT PER BASE ACRE $60.00 * are the final reported yield and MYA price values. $5, $4, ARC Payment $3, PLC Payment $2, $1, Total PLC Payment to Farm **2014 contains the actual reported yield and price values.

29 Contact Information Dr. Michael Deliberto Louisiana State University Agricultural Center Dept. of Agricultural Economics & Agribusiness 101 Martin D. Woodin Hall Office: (225)

30 Louisiana Rice Production Yield estimated at cwt/ac Million cwt. Thous. acres Source: USDA NASS Production Harvested Acres 2015

31 Market Outlook Downward revisions to farm prices for LG ($11.30) and MG ($17.10) based on reported cash prices through November and expectations for prices the remainder of the year Slightly higher area and yield estimates for 2015/16 Long grain production forecasted at M cwt, 18% smaller than a year ago Plantings are 15% lower due to low price expectations at plantings; unchanged medium grain production and plantings Plantings declined in all states; yields forecasted lower Supply forecasted to be 5% lower than a year earlier Large carry-in for both long and medium grain Exports are 2% larger than a year ago Record pace of shipments in the first 4 months of the market year; declining price difference over Asian competitors; and expectations regarding remaining shipments Long grain exports down; medium/short grain exports up Source: USDA. ERS. Rice Outlook. January 14, 2016 and USDA February 9, 2016 WADSE.

32 Regional Rice Yields Est. State Rice Yield in 2015: 6,940 lbs/ac 8,000 7,300 7,500 7,100 (down from 7,130) 7,000 6,320 6,500 6,060 6,000 5,820 6,060 5,920 6,260 6,320 5,590 5,500 Northeast 5,000 Southwest 4,500 4,000 3,500 3,000 2,500 2, Source: USDA NASS. Quick Stats. Acreage and Production

33 Average Urea Price Source: DTN. Retail fertilizer price trends. January 29, 2016.

34 Rice Acres Planted Source: USDA. ERS. Rice Yearbook. March 31, L OU ISIAN A C AL IFOR N IA AR KAN SAS ,196 1,291 1,076 1,486 1, MISSISSIPP I MISSOU R I T EXAS

35 Production (cwt) by State Texas Missouri Mississipppi Louisiana California Arkansas 5,000 25,000 45, Source: USDA. ERS. Rice Outlook. January 14, , , , ,000

36 Long Grain Medium Grain Nov-15 Aug-15 May-15 Feb-15 Nov-14 Aug-14 May-14 Feb-14 Nov-13 Aug-13 May-13 Feb-13 Nov-12 Aug-12 May-12 Feb-12 Nov-11 Aug-11 May-11 Feb-11 Nov-10 Aug-10 May-10 Feb-10 Nov-09 Aug-09 Monthly Farm Prices, by Class $17.00 $16.00 $15.00 $14.00 $13.00 $12.00 $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00

37 Average Anhydrous Price Source: DTN. Retail fertilizer price trends. February 9, 2016.

38 Input Expenditures ($/ac) $ $ $ % 61% $ % 58% 53% 54% 48% $ $ Fertilizer CLEARFIELD variety, drill planted, southwestern Louisiana Seed 2014 Fuel

39 NRAVC Tenant Operator CLXL Drill Planted, 2016 Percent 95% 100% 105% Rice Market Price ($/cwt) 80% 85% 90% 110% 115% 120% Yield (cwt.) $9.60 $10.20 $10.80 $11.40 $12.00 $12.60 $13.20 $13.80 $ % % % % % % % % %

40 Net Returns Tool (with PLC) Parameters: Farm Price Received Farm Yield MYA Price Rental Share (or cash eq.) Cost Shares (%) PLC Program Yield Base Acres NRAVC to the GRW