Arkansas Rice Situation and Outlook Presented at 2016 USA National Rice Outlook Conference Memphis, Tennessee December 7-9, 2016

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1 Arkansas Rice Situation and Outlook Presented at 2016 USA National Rice Outlook Conference Memphis, Tennessee December 7-9, Bobby Coats, Ph.D. Professor Economics Department of Agricultural Economics and Agribusiness Division of Agriculture University of Arkansas System

2 Arkansas Rice Situation and Outlook Arkansas All Rice Arkansas Production by County Louisiana Mississippi Slide 2. Texas

3 Slide 3.

4 Arkansas All Rice Harvested Acres, 1950 to ,521,000 Acres, 18% > 2015, Failed 24,041, Prevented Planted 59,874 2,000,000 1,800,000 1,600,000 Slide 4. NASS Estimate 1981= = = =1285 1,400,000 1,200,000 1,000, , , , , = = = = =1286 Without Weather & Global Economic Issues Potential Total Acreage Including Failed and Prevented = 1,604,

5 Slide 5. Arkansas All Rice Yield Per Acre, 1950 to th Highest Yield 7150 lbs. (159 bus.) 10.4% above 2010 s 6480 lbs. (144 bus.) 8,000 7,000 6, =6150 lbs, 137 bus 5,000 4,000 3,000 2,000 1, =6800 lbs, 151 bus 2010=6480 lbs, 144 bus 2011=6770 lbs. 148 bus 2012=7480 lbs. 166 bus 2013=7560 lbs. 168 bus 2014=7530 lbs. 167 bus 2015=7340 lbs. 163 bus NASS Estimate

6 Slide ,000,000 Arkansas All Rice Production, 1950 to s 109 million cwt. 4 th largest on record Previous 15 year average 98.4 million cwt. 120,000, ,000, = = ,000, = ,000,000 40,000,000 20,000,000 0 NASS Estimate 2007= = = = = = = = =

7 Slide 7. Stuttgart Arkansas Long Grain Rice Rice = blue Soybeans = green Arkansas County Harvested Acres 90,192 (16) 86,669 (15) 95,000 (14) 75,700 (13) 91,700 (12) 92,800 (11) Arkansas County

8 Arkansas Long Grain Rice Harvested Acres, 1972 to : 1,390,000 acres 345,000 acres (16.6%) above 2015 s 1,045,000 acres Slide to 2015 average 1,133,083 1,800,000 1,600,000 Previous Five Year Average = 1,068, ,000 above previous 5 year average 1,400,000 1,200,000 1,000, , , , , , , , ,000 1,062,000 1,293,000 1,134, ,000 1,024, , , ,000 1,075,000 1,030,000 1,071,000 1,111,000 1,230,000 1,070,000 1,200,000 1,140, ,000 1,160,000 1,283,000 1,374,000 1,130,000 1,472,000 1,340,000 1,290,000 1,400,000 1,533,000 1,295,000 1,180,000 1,295,000 1,245,000 1,590, ,000 1,170, ,000 1,265,000 1,045,000 1,390, , , , , NASS Estimate 43 1

9 Arkansas Long Grain Rice Production, 1972 to s Preliminary Estimate 99.4 million cwt. 3 rd Highest on Record ,006,000 18,095,000 25,105,000 29,370,000 32,538,000 28,463,000 39,952,000 37,443,000 42,480,000 57,280,000 47,608,000 33,012,000 46,320,000 50,712,000 49,462,000 45,259,000 57,447,000 57,458,000 53,034,000 58,328,000 66,912,000 53,928,000 68,160,000 61,218,000 55,055,000 65,192,000 73,644,000 79,417,000 68,478,000 93,178,000 86,162,000 85,140,000 97,720, ,945,000 89,485,000 85,314,000 85,988,000 84,162, ,714,000 61,516,000 87,750,000 71,820,000 95,761,000 77,121,000 99,385,000 Slide ,000, ,000,000 80,000,000 60,000,000 40,000,000 20,000,000 0 Preliminary Estimate 0

10 Slide 10. Ranking 2016 Arkansas Long Grain Rice Producing Counties Top 4 AR Long Grain Rice Counties by Harvested Acreage < 5,000 5,000 to 9,999 10,000 to 24,999 25,000 to 49,999 50,000 to 74,999 75,000 to 99, ,000 to 124, ,000 + Top 4 Long Grain Counties Poinsett 98,595 Jackson 96,746 Cross 91,957 BENTON CARROLL BOONE MADISON WASHINGTON Lawrence 89,206 CRAWFORD SEBASTIAN POLK SEVIER SCOTT HOWARD LITTLE RIVER 37 FRANKLIN 38 LOGAN PIKE HEMPSTEAD JOHNSON MONTGOMERY MILLER LAFAYETTE YELL 35 NEWTON NEVADA COLUMBIA POPE 30 GARLAND PERRY 32 HOT SPRING 36 MARION CLARK 31 DALLAS OUACHITA SEARCY VAN BUREN CONWAY 33 FAULKNER 29 SALINE BAXTER FULTON RANDOLPH 20 GRANT CALHOUN UNION PULASKI 28 STONE CLEBURNE JEFFERSON 9 CLEVELAND BRADLEY IZARD WHITE 25 LONOKE 5 INDEPENDENCE 24 LINCOLN 19 DREW 23 ASHLEY 26 SHARP WOODRUFF 13 PRAIRIE 14 MONROE 15 ARKANSAS 6 LAWRENCE 4 JACKSON 2 DESHA 22 CHICOT 17 CLAY 8 GREENE 7 CRAIGHEAD 11 POINSETT 1 CROSS 3 ST. FRANCIS 16 LEE 21 PHILLIPS 18 CRITTENDEN 12 MISSISSIPPI 10 4

11 Slide 11. Arkansas Medium Grain Rice

12 Slide 12. Arkansas Medium Grain Rice Harvested Acres, 1972 to ,000 acres Previous 14 year average 163, ,000 NASS Estimate 250, , , , , , , , , , , , , , ,000 69,500 84, , , , , , , , , , , , , , , , , , , , , ,000 99, , , , , , , , , , ,000 50,

13 Slide 13. Arkansas Medium Grain Rice Production, 1972 to Million cwt. 20,000,000 18,000,000 16,000,000 Preliminary Estimates 14,000,000 12,000,000 5,763,000 6,958,000 6,953,000 9,541,000 6,714,000 6,016,000 6,937,000 5,286,000 9,073,000 11,094,000 8,400,000 5,784,000 6,400,000 3,809,000 4,544,000 7,656,000 7,236,000 6,322,000 6,912,000 8,392,000 8,940,000 8,007,000 12,666,000 11,682,000 16,770,000 13,908,000 12,400,000 15,513,000 17,514,000 9,620,000 10,530,000 10,988,000 10,780,000 6,787,000 7,020,000 10,440,000 6,890,000 15,702,000 12,901,000 16,524,000 8,299,000 9,008,300 16,136,000 17,160,000 9,295,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,

14 Ranking 2016 Arkansas Medium Grain Rice Producing Counties Top 3 AR Medium Grain Rice Counties by Harvested Acreage Slide 14. < 5,000 5,000 to 9,999 10,000 to 24,999 25,000 to 49,999 50,000 to 74,999 75,000 to 99,999 Top 3 Medium Grain Counties BENTON CARROLL BOONE Poinsett 22,739 MARION Jackson MADISON 16,699 WASHINGTON NEWTON Lawrence 15,764 CRAWFORD SEBASTIAN POLK SEVIER SCOTT HOWARD FRANKLIN LOGAN PIKE JOHNSON MONTGOMERY YELL CLARK POPE GARLAND PERRY HOT SPRING SEARCY VAN BUREN CONWAY SALINE DALLAS BAXTER FULTON RANDOLPH 5 FAULKNER GRANT PULASKI STONE JEFFERSON 21 CLEVELAND IZARD CLEBURNE WHITE 17 LONOKE 16 INDEPENDENCE 23 LINCOLN SHARP JACKSON 2 ARKANSAS 9 LAWRENCE 3 WOODRUFF 12 PRAIRIE 6 MONROE 15 CLAY 8 GREENE 14 CRAIGHEAD 4 POINSETT 1 CROSS 7 ST. FRANCIS 13 LEE 18 PHILLIPS 22 CRITTENDEN 10 MISSISSIPPI ,000 to 124,999 LITTLE RIVER HEMPSTEAD NEVADA CALHOUN DREW DESHA 11 OUACHITA BRADLEY 125,000 + MILLER LAFAYETTE COLUMBIA UNION ASHLEY 20 CHICOT 3

15 Slide 15. WORLD RICE SUPPLY AND DEMAND ESTIMATES 15

16 WORLD RICE AREA HARVESTED 1987/ /17 Slide Millions of Hectares World rice acreage at million hectares Largest on record / / / / / / / / / / / / / / /16 Source: USDA 16

17 WORLD RICE YIELD (ROUGH) 1987/ /17 Slide Metric Tons World rice yield at 4.4 metric tons per hectare Consistant with previous 6 periods / / / / / / / / / / / / / / /16 Source: USDA 17

18 WORLD RICE MILLED PRODUCTION 1987/ /17 Slide Millions of Metric Tons 300 World rice milled production at million metric tons Highest on record / / / / / / / / / / / / / / /16 Source: USDA 18

19 WORLD RICE TOTAL USE 1987/ /17 Slide Millions of Metric Tons World rice total use at million metric tons Highest on record Slightly higher than 2013/ / / / / / / / / / / / / / / /16 Source: USDA 19

20 WORLD RICE MILLED PRODUCTION & CONSUMPTION 1987/ /17 Slide Millions of Metric Tons 300 World rice milled production at million metric tons, highest on record World rice production exceeded consumption current 10 marketing periods / / / / / / / / / / / / / / /16 Source: USDA 20

21 WORLD RICE TRADE YEAR EXPORTS CALENDAR 1987/ /17 Slide Millions of Metric Tons World trade at 41 million metric tons, 3 rd highest on record In-part reflects anemic global growth Global reflation providing bullish trade bias for / / / / / / / / / / / / / / /16 Source: USDA 21

22 WORLD RICE ENDING STOCKS 1987/ /17 Slide Millions of Metric Tons World rice ending stocks at million metric tons Highest since 2001/ / / / / / / / / / / / / / / /16 Source: USDA 22

23 Slide 23. U.S. Long-Grain Rice Supply and Demand Estimates 23

24 U.S. Long Grain Rice Harvested Acres 1972/ /16 913,200 1,058,400 1,370,000 1,453,300 1,531,000 1,467,000 1,543,000 1,925,000 1,940,000 2,170,000 2,482,000 2,175,000 2,095,000 1,942,000 1,806,000 1,698,000 2,233,000 1,998,000 2,065,000 2,023,000 2,372,000 2,028,000 2,379,000 2,312,000 1,967,000 2,309,000 2,568,000 2,718,000 2,189,000 2,697,000 2,512,000 2,310,000 2,571,000 2,734,000 2,186,000 2,052,000 2,350,000 2,265,000 2,826,000 1,739,000 1,979,000 1,767,000 2,196,000 1,843,000 2,412,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 Slide long grain rice harvested acres are estimated at 2,412,000 acres 31% above The 5 year average is 1,904,800 acres, the 10 year average is 2,120,300 acres, and the 15 year average is 2,268,467 acres Source: USDA 24

25 200 U.S. Long Grain Rice Production 1982/ / Million hundredweight Slide long grain rice production is estimated at million cwt. 32% above last year. The 5 year average 138million cwt and 10 year average 147million cwt May, 16 June, 16 July, 16 Aug, 16 Sept, 16 Oct, 16 Nov, 16 Source: USDA 25

26 250 U.S. Long Grain Rice Total Supply 1982/ / Million hundredweight Slide /17 long grain rice total supply is estimated at 219 million cwt, 2nd largest on record, 22% above last year. The 5 year average was 182 million cwt and 10 year average 189 million cwt May, 16 June,16 July, 16 Aug, 16 Sept, 16 Oct, 16 Nov, 16 Source: USDA 26

27 120 U.S. Long Grain Rice Total Exports 1982/ /17 Million hundredweight Slide /17 long grain rice total exports are estimated at 79 million cwt 6th largest on record. The 5 year average 70 million cwt and the 10 year average 72 million cwt May, 16 June, 16 July, 16 Aug, 16 Sept, 16 Oct, 16 Nov, 16 Source: USDA 27

28 U.S. Long Grain Rice Total Use 1982/ / Million hundredweight Slide /17 long grain rice total use is estimated at 182 million cwt, 2nd largest on record. The 5 year average 159 million cwt and 10 year average 166 million cwt May, 16 June, 16 July, 16 Aug, 16 Sept, 16 Oct, 16 Nov, 16 Source: USDA 28

29 WORLD RICE MILLED PRODUCTION & CONSUMPTION 1987/ /17 Slide Millions of Metric Tons 300 World rice milled production at million metric tons, highest on record World rice production exceeded consumption current 10 marketing periods / / / / / / / / / / / / / / /16 Source: USDA 29

30 60 U.S. Long Grain Rice Ending Stocks 1982/ /17 Million hundredweight 2016/17 long grain rice ending stocks are estimated at 37.2 million cwt the largest since The 5 year average million cwt and 10 year average 23.8 million cwt 40 Slide May, 16 June, 16 July, 16 Aug, 16 Sept, 16 Oct, 16 Nov, 16 Source: USDA 30

31 Slide 31. The Year Ahead Build a Foundation for 2017 Rice Price and Acreage Outlook

32 Slide 32. Macro Issues Key Driver of Market Activity

33 Slide 33. Present Governments and Central Banks Intervention Strategy Present policy inadequate to overcome: Chronic global slow growth Low to negative interest rates Building debt Continuation of current policy At Best domestic and global deflationary forces remain problematic Impact: Chronic price weakness likely for equity, commodity, etc. prices 4

34 Slide 34. Transitional Reflationary Policy Governments and Central Banks Intervention Global Economic Transition Underway Throughout 2016 Objective: Reflating Domestic and Global Economies Catalyst: Elevated levels of Government stimulus and Central Bank intervention Bearish bonds, utilities, etc. Increasingly bullish many hard assets like stocks, commodities, land, etc. Bonds topped Equities will topped Commodities, land, fine arts, etc. new highs 4

35 Slide 35. Reflation One Driver Lifting Global Markets And Commodity Prices Strength or weakness in the following markets is positive for future rice, cotton and grain prices

36 10 Year US Treasury Yield, Daily Chart, May 2016 to present - Bearish Bonds Yields have risen from the July low 1.34 to 2.45 Near term low in place Slide 36. May 2014 to present

37 Dow Jones Industrial Average, Weekly Chart, February 2014 to present 2017 expect more price strength than weakness Slide 37. Feb to present

38 EFA Global Equities excluding U.S. and Canada, Weekly Chart Feb to present Slowly building economic momentum Slide 38. Feb to present

39 EEM Emerging Markets, Weekly Chart, Feb to present Slide 39. More strength than weakness since Jan Building momentum critically important for healthy commodity prices Feb to present

40 $CRB Index, Commodity Index, Weekly Chart, 1997 to present Chronic slow economic growth & over production produced anemic commodity prices Globally Aggressive Government and Central Bank intervention required to elevate economic activity and commodity prices in the aggregate Slide present Dangerously low

41 $WTIC Light Crude Oil Continuous Weekly Contract, Feb to present Light crude above can move significantly higher Slide 41. Feb to present

42 $USD US Dollar Index Cash Settle, Monthly Chart, 1997 to present Without major global 2017 reflation efforts Dollar could surprise to the upside Slide 42. Watch for dollar weakness in January present

43 $SOYB Soybeans, Continuous Contract, 2014 to present Geopolitical uncertainty a factor contributing to lift in some commodity prices Slide 43. Near term neutral Weakness to previous low a possibility 2017 will have pricing opportunities Feb to present

44 $Corn Corn - Continuous Contract, Weekly Chart, 2014 to present Geopolitical uncertainty a factor contributing to some commodity price support Slide 44. Near term neutral Remain concerned about price weakness 2017 will have pricing opportunities Feb to present

45 $Wheat Wheat - Continuous Contract, 2014 to present Slide 45. Bottoming process 2017 will have pricing opportunities 2014 to present

46 Rough Rice - Jan 17 (ZRF17), Monthly, 2006 to present Global slow growth have countries --- food security conscious Contributing to excess production and price weakness Slide 46. Bottoming process underway 2006 to present Reflation should start working in the favor of higher rice prices Domestically and globally over supply remains problematic Overplanting & favorable global weather 2017 problematic

47 Unknowns: In 2017 What Are the Global Impacts of La Nina / Other Possible Weather Anomaly? Slide 47.

48 Slide 48.

49 1,600,000 1,500,000 1,400, Arkansas Long Grain Rice Harvested Acreage Expectation Given Previous Discussion 1,067,000 acres (2016 = 1,390,000) Slide 49. 1,300,000 1,200,000 1,100,000 1,000, , , , , , , , ,000 1,062,000 1,293,000 1,134, ,000 1,024, , , ,000 1,075,000 1,030,000 1,071,000 1,111,000 1,230,000 1,070,000 1,200,000 1,140, ,000 1,160,000 1,283,000 1,374,000 1,130,000 1,472,000 1,340,000 1,290,000 1,400,000 1,533,000 1,295,000 1,180,000 1,295,000 1,245,000 1,590, ,000 1,170, ,000 1,265,000 1,045,000 1,390,000 1,067, , , , , , , , ,

50 Arkansas Long Grain Rice Production, 1972 to ,006,000 18,095,000 25,105,000 29,370,000 32,538,000 28,463,000 39,952,000 37,443,000 42,480,000 57,280,000 47,608,000 33,012,000 46,320,000 50,712,000 49,462,000 45,259,000 57,447,000 57,458,000 53,034,000 58,328,000 66,912,000 53,928,000 68,160,000 61,218,000 55,055,000 65,192,000 73,644,000 79,417,000 68,478,000 93,178,000 86,162,000 85,140,000 97,720, ,945,000 89,485,000 85,314,000 85,988,000 84,162, ,714,000 61,516,000 87,750,000 71,820,000 95,761,000 77,121,000 99,385,000 78,317,000 Slide ,000, ,000,000 80,000,000 60,000,000 40,000,000 20,000, s Preliminary Estimate of 78 million cwt. Preliminary Estimate 2

51 Slide 51.

52 113, , , , , , , , , , , , ,000 69,500 84, , , , , , , , , , , , , , , , , , , , , ,000 99, , , , , , , , , , , , , , , , Slide 52.

53 Slide 53. Concluding Thoughts 4

54 Governments and Central Banks Positioning Slide 54. Global Economic Transition Underway in 2016 and will accelerate in 2017 Objective: Reflating Domestic and Global Economies Growth objectives will be achieve, cost is a secondary consideration. 4

55 Slide 55. Governments and Central Bank s Positioning Today s Market Landscape is different from yesterday s A business friendly environment is emerging with lower taxes, deregulation, increased infrastructure and defense spending. Near term moving from falling interest rates to higher interest rates From a stable dollar to a higher dollar From depressed oil prices to higher oil prices New records will be set in the equities market 4

56 Governments and Central Bank s Positioning Investment and marketing strategies Shifting from bonds to equities From equites to commodities, land, fine arts, etc. Underestimating geopolitical risks will have consequences Federal Reserve will raise rates in December 2016 and 2 to 4 times in 2017 Slide 56. 4

57 Slide 57. WILDCARD CONSIDERATIONS 4

58 10 Year US Treasury Yield, May 2016 to present Expectation is interest rates remain supportive of economic activity An accelerated move to the upside would be short lived but highly disruptive Slide 58. May 2014 to present

59 $WTIC Light Crude Oil Continuous Contract, Feb to present Oil will breakout to possibly 60-plus area -- Trading range likely 40 to 60 Oil price shock would be highly disruptive to global economic recovery Slide 59. Feb to present

60 $USD US Dollar Index Cash Settle, Monthly 1997 to present Expect a reasonably managed dollar in 2017 Dollar could surprise to the upside Slide 60. Watch for dollar weakness in January present

61 Slide 61. President-Elect Donald Trump Markets are moving plus or minus on a TWEET Trump

62 Dow Jones Industrial Average, February 2014 to present Slide 62. U.S. equities price strength Favorable for rice and grains Feb to present

63 EFA Global Equities excluding U.S. and Canada, Feb to present Slide 63. Global Equities excluding US and Canada Favorable for rice and grains Feb to present

64 EEM Emerging Markets, Weekly, Feb to present Slide 64. Emerging Market s price strength Favorable for rice and grains Feb to present

65 WORLD RICE MILLED PRODUCTION & CONSUMPTION 1987/ / Millions of Metric Tons Slide World rice production exceeded consumption current 10 marketing periods / / / / / / / / / / / / / / /16 Source: USDA 65

66 WORLD RICE ENDING STOCKS 1987/ /17 Slide Millions of Metric Tons World rice ending stocks at million metric tons Highest since 2001/ / / / / / / / / / / / / / / /16 Source: USDA 66

67 Slide 67.

68 Per Unit Costs Slide 68. Cost Estimates provided by Professor Archie Flanders and Breana Watkins, Program Associate Economics

69 1,600,000 1,500,000 1,400, Arkansas Long Grain Rice Harvested Acreage Expectation Given Previous Discussion 1,067,000 acres (2016 = 1,390,000) Slide 69. 1,300,000 1,200,000 1,100,000 1,000, , , , , , , , ,000 1,062,000 1,293,000 1,134, ,000 1,024, , , ,000 1,075,000 1,030,000 1,071,000 1,111,000 1,230,000 1,070,000 1,200,000 1,140, ,000 1,160,000 1,283,000 1,374,000 1,130,000 1,472,000 1,340,000 1,290,000 1,400,000 1,533,000 1,295,000 1,180,000 1,295,000 1,245,000 1,590, ,000 1,170, ,000 1,265,000 1,045,000 1,390,000 1,067, , , , , , , , ,

70 Arkansas Long Grain Rice Production, 1972 to ,006,000 18,095,000 25,105,000 29,370,000 32,538,000 28,463,000 39,952,000 37,443,000 42,480,000 57,280,000 47,608,000 33,012,000 46,320,000 50,712,000 49,462,000 45,259,000 57,447,000 57,458,000 53,034,000 58,328,000 66,912,000 53,928,000 68,160,000 61,218,000 55,055,000 65,192,000 73,644,000 79,417,000 68,478,000 93,178,000 86,162,000 85,140,000 97,720, ,945,000 89,485,000 85,314,000 85,988,000 84,162, ,714,000 61,516,000 87,750,000 71,820,000 95,761,000 77,121,000 99,385,000 78,317,000 Slide ,000, ,000,000 80,000,000 60,000,000 40,000,000 20,000, s Preliminary Estimate of 78 million cwt. Preliminary Estimate 2

71 113, , , , , , , , , , , , ,000 69,500 84, , , , , , , , , , , , , , , , , , , , , ,000 99, , , , , , , , , , , , , , , , Slide 71.

72 Robert Coats, Ph.D. Professor Economics University of Arkansas Division of Agriculture Department of Agricultural Economics and Agribusiness 2301 S. University Avenue Little Rock, AR Phone: Fax: Mobile:

73 Arkansas Rice Situation and Outlook Presented at 2016 USA National Rice Outlook Conference Memphis, Tennessee December 7 9, 2016 Robert Coats, Professor Economics University of Arkansas Division of Arkansas Department of Agricultural Economics and Agribusiness 2011 NASS Cropland Data Layer

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