Arkansas farmers face potentially dire circumstances as the harvest season begins. According to our partner Talk Business & Politics, experts warn that one in three farms in the state could shutter by next year if the federal government doesn't provide some type of supplemental assistance.
This fall, Arkansas farms produced more rice than any other state in the South, and farmers in the Natural State sell nearly half of the rice exported by the U.S. University of Arkansas Agricultural Economist Alvaro Durand-Morat studies the global rice trade. He says you need an international context to understand the economic pressures squeezing Arkansas farmers.
Alvaro Durand-Morat: The U.S. is not a large producer of rice, globally speaking, but we are a large exporter of rice. Why? Because we don't consume much rice per capita in the U.S., so we export roughly 40 percent of what we produce. So the U.S., globally speaking, has ranked historically among the top five rice exporters in the world. So many people don't know that Arkansas is the largest rice-producing state in the United States. We produce roughly 50 percent of the rice that the U.S. produces as a whole.
And so the main issue that the rice sector is facing, not only Arkansas but the U.S. rice sector in general, is a combination of two things: low rice prices and increasing input costs. And that is putting our farmers in a very difficult situation, with most numbers showing significant losses per acre for this year and potentially for the next one.
Jack Travis: So what factors are playing into those low prices and increased costs?
Alvaro Durand-Morat: I think in general the low prices are primarily driven by external, international factors. The U.S. competes globally, so whatever happens in other countries affects all of our farmers. The main reason for the low price internationally today is India having record-high production and therefore a lot of rice to export. India pretty much is flooding the global market with rice, and of course everything else equal, that will put downward pressure on prices. On top of that, India is the largest exporter of rice globally. So if they have more, they will sell more, and that will put downward pressure on prices.
On the demand side, Indonesia, the largest rice-importing country in 2024, is having a bumper crop. They are expected not to import much. The Philippines, the second-largest importer of rice, put a ban on imports for a while to improve the domestic price to benefit their farmers. So there is a combination of a lot of rice to be exported, while countries that are traditional importers are not needing much rice now. All that creates the perfect storm for prices to go down.
Because the U.S. is exposed to that market through exports, that ultimately will come down to the domestic market as well.
Jack Travis: So, we are losing ground in the global market?
Alvaro Durand-Morat: We are losing ground, not as fast as you would expect given the decreasing prices. One of the reasons for the U.S. still holding a very good share of the international market is because we have signed good trade agreements in the past. Think about NAFTA or USMCA, think about NAFTA with Central America. Those markets are where we export most of our rice, and we still have preferential treatment. But that preference has been eroded year after year for factors such as price competitiveness, but also quality, which is one of the issues that I'm working on—to see how quality is playing a role in that erosion of exports.
Jack Travis: Could you talk a little bit more about how quality is playing a role?
Alvaro Durand-Morat: Ultimately, whatever you produce, you have to sell, and consumers have to want it. Although for most people rice might seem homogeneous—who cares about rice?—people that consume a lot of rice, like Central American consumers and Colombian consumers, care about rice and its quality. When I talk about quality, it's not only how the rice looks in the bag but also how the rice cooks.
For different reasons—consumer preferences changing and production changing—the quality of U.S. rice has been compromised relative to other sources. Maybe I should be more careful here. When I say U.S. rice, I'm looking at the southern U.S. because California produces a type of rice that is very different and goes to different markets.
Consumers, like you and me, choose what we want to eat. If the rice we are producing is not at par with the quality they want, they will find better quality somewhere else. Some of that has been happening, and that's what we are trying to economically assess—what the impact of that is, and primarily to find a solution to help the U.S. rice industry foster growth and compete better. It's not only prices, it's quality.
Jack Travis: What ways do you see farmers, the federal government, or maybe international trade– What solutions are out there? Some experts are saying that Arkansas farmers are in a crisis, and one in three farms might shut down.
Alvaro Durand-Morat: I didn't talk yet about the cost of production. Costs are going up for many reasons. You can think about the war in Russia and Ukraine that has put upward pressure on fertilizer prices. You have import tariffs also playing a role in the inputs that we import and use for production.
So the combination of low prices and high production costs is putting farmers in a really bad situation. What are some of the solutions? The federal government, through the One Big and Beautiful Bill, introduced reforms to some of the key commodity programs that we use to support farmers. That will bring some help, but the issue is that support through the price loss coverage program, specifically for rice farmers, won't come until 2026 because of the way the policy works.
The government also approved a package of help back in July. So there is direct aid coming to farmers, but many claim it is not close to enough. President Trump said yesterday that maybe some of the revenues from import tariffs may be used to support farmers. According to colleagues who know more about the legal issues, it's not that easy. But I think the federal government is definitely trying to provide more support.
When it comes to markets, we need to strengthen international trade because we have seen that has benefited U.S. rice. It's hard to do that in an environment where import tariffs are being implemented, but that is an avenue that needs to continue. Developing new markets is important. The rice industry is working hard on going to markets with potential and making the case for U.S. rice. Recently, U.S. rice was in Morocco, a market they see potential in. Market development is a long-term strategy. But we need both short-term relief and long-term fixes.
Jack Travis: Let's talk short-term, long-term future. What are you going to be paying attention to primarily?
Alvaro Durand-Morat: Well, definitely. We are here to serve our stakeholders. And when I say stakeholders, it's the agricultural sector in general, right. So we are working and we have a great team of extension economists working. Just how do we get through this short-term crisis, right. And so what type of solutions we can provide as researchers, but also what type of policies we can suggest, right?
And so again, in the short term there are not many, I think, not many cards to play, right. I mean, it may come down to primarily help from the federal government, which again, we can discuss whether that is good or not. But again, that seems to be kind of the only card to be played.
I think the federal government is also, Secretary of Agriculture yesterday announced that they will start investigation into potential market power issues with input suppliers. But again, that may take longer than a year, I don't know.
But we definitely need to help farmers find new markets where they can get the best price they can for the product that they produce. And at the same time help them produce at the lowest cost possible. All this in a context of very efficient agricultural sector in the U.S. So there is not much room to be more efficient, to be honest, right. So again, that is what I think makes the situation even more critical. We are not talking about farmers that need to improve yields or need to, you know, they are already one of the best in the world, right. And so when you are that good and you still losing money, I can see the feeling, right? You can see the situation being so, so critical.
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