rice

Forrest Laws | Dec 21, 2020

Texas rice producers could plant close to or, possibly, more than the 184,000 acres they planted in 2020 next spring – even if prices for other crops they can grow remain at the higher levels they’ve risen to in recent trading sessions.

The higher corn and soybean prices have generated excitement among growers across the Southern Rice Belt in recent weeks. But that won’t necessarily translate into fewer rice acres in Texas, according to Joe Outlaw, agricultural economist with Texas A&M University.

“With corn futures going up, you would say, well, Joe, why would you expect more than 184,000 acres?” said Outlaw, Regents Professor and co-director of the TAMU Agricultural and Food Policy Center. “The answer is that corn has moved up, but it’s just now getting to the part where it’s at the break-even point for Texas producers.

Outlaw, speaking during the USA Rice Federation’s State Reports Outlook Webinar for Texas, said a number of factors, including water availability, will come into play before Texas rice producers begin planting, possibly as early as Feb. 1.

Texas rice acres have fluctuated substantially, falling to as low as 2012’s 135,000 acres following the 2011 drought, which reduced the levels in the reservoirs around Austin, which supply much of the water to Texas’ rice farmers.

“This chart doesn’t tell you everything,” said Outlaw, referring to a chart showing Texas Planted Rice Acres and Projected Insurance Prices from 2011-2012. “Obviously, water availability like we saw after 2011 can drive a lot of things.

“Relative crop prices are very important in agriculture. A lot of times economists try to make sense out of numbers like these, and relative crop prices for things that can be grown in the area stink. And when they stink you tend to get the safe crop for that area, and for rice producers it tends to be rice.”

Why? Outlaw says it’s a matter of weighing the risks.

“You might have risk on the price side, but you don’t have as much risk on the can I make a crop side. When prices start falling off, you get people moving back to rice. Yes, corn has started moving up, but it’s just now reaching the break-even point for Texas producers. Obviously, whether you can get your crop in on time is always important.”

He displayed a crop budget for a typical farm in the rice-producing area west of Houston. “This is not a representative farm (such as the ones the AFPC prepares for the Agriculture Committees in Congress,)” he said. “This is your average farm that we use in Extension budgets, and you’ll notice I have an 86-hundredweight yield, not the 110 that we’re using with the high-flying people that we work with on our representative farm panels.

“That average budget on the first crop shows a negative $270 return,” he noted. “You see there’s no government payment. The government payment should be somewhere around $145 per acre for this farm. So you would still be looking at a $70 loss on the first crop and a $7 gain on the second crop.”

Outlaw said many ask him why people plant when it doesn’t look like they’re going to make any money? “The answer is it’s all economics, and, if they can cover all their variable and contribute to their fixed costs, they’re going to do it. That’s just the way it is. You have all that equipment that is good, but it’s very unique to rice, and you want to utilize that equipment.

“To me, the outlook looks very strong, and you have prices rebounding, and, frankly, I think we’re in a very good place.”

How much could rice acres go up? “For Texas, I will not be surprised if it’s at least 5% higher than it was in 2020, based on the numbers I just looked at,” he said. “I haven’t talked to anybody about any kind of plans, but just looking at the numbers I would be surprised if it’s not at least 5% higher.” (That would be 9,200 acres, which would make 2021 plantings close to the 195,000 acres in Texas in 2016 and 2018.)

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