2018 will be a year to remember. In the rice market we have always said there are no two years alike and certainly there are specific years when something special happened that make them stand out. The first one that comes to mind is 2008 when the market thought the world was running out of food and prices of rough rice reached $600/ton FOB New Orleans. From that point forward, we heard the term “food security” and every country around the world developed a food security program as a result.
However, 2018 is something completely different, something unexpected. This is certainly not your grandfather’s market. Times have changed. Developing countries are more developed than before and are producing grains, including rice at record levels due to increased technology and government programs in some markets.
The announcement this week by the White House of emergency aid for farmers to the tune of $12 billion as a result of the administration’s commercial trade wars is of serious concern to farmers. Their livelihoods are at stake. This trade war and related threats are hurting U.S. exports. U.S. rice shipments to Mexico are being displaced by a duty-free quota of 150,000 tons from Southeast Asia and Mercosur are being used and there is talk of increasing that volume. The announced emergency aid package for farmers is merely a band-aid on a stab wound in the chest. Farmers do not want government payments but prefer to have open and free markets where they are on a level playing field with their competition.
U.S. farmers do a very good job when they work in a fair marketplace. If this trade war continues then there will be farmers going out of business and will take years to recuperate. Now where is that book grandfather used to read to me called “It Could Be Worse”?