Uruguay will see a siginificant drop in farmland dedicated to rice production

In Uruguay’s north and east, the principal areas for rice cultivation, low water reserves are forcing producers to sow less rice. According to early estimates, 40,000 less hectares will be dedicated to rice production than in 2011.

As of today, the average rice irrigation reservoir is at only 50% capacity. In the area around Artigas, as well as in practically all of provinces of Treinta y Tres and Rocha, the problem is even more severe. In those areas reservoirs are at only 40% capacity.

Hernán Zorrilla, the vice-president of the Association of Rice Culitvators (ACA), explained that the ACA expects only 180,000 hectares to be designated for rice cultivation (a decrease of 18%). Sowing has already begun in the north and will start within a few days in Uruguay’s east.

Despite the low reservoirs, Romulo Gamarra, director of the ACA, said heavy rains in the next month would create a significant problem for sowing.

He also predicted that mostly commonly planted varieties of rice would be INIA Tacuarí, which has a shorter growing cycle, and INIA Olimar which is often planted during water shortages.

“The area [under cultivation] will decrease, the question is by how much. Every producer is going over their accounts to figure out how much to plant outside the optimum planting dates [up to the end of October]. Before rice producers sowed everything that water reserves would allow, but with the current costs you have to be much more careful and work only the fields that produce good yields” said Gamarra.

According to the ACA, the cost of sowing one hectare during the last harvest was more than $2,012 USD, which is near a record high. High sowing costs left many producers in the red. ACA says these costs combined with producers switching to soy beans, which have a higher profit margin, have been the greatest reason for Uruguay’s declining rice production.

This Uruguay Business Report article is a translation of an article that appeared in the Uruguayan newspaper El País. The original article is available here in Spanish. Uruguay Business Reports translation by Donovan Carberry.

Uruguayan rice sales to Brazil expected to jump after Brazilian government says no to new tax

Image courtesy of CIAT International Center for Tropical Agriculture

Uruguay could see a big increase in rice exports to Brazil after the Brazilian government decided not to approve a tax which would have added 9.5% to the price of rice and several other products.

“Recently a lot of Brazilian buyers were reluctant to do business or consider buying rice because of the risk that government would vote in the tax and they would have to pay the surcharge”, explained Adolfo Crosa, the president of Rice Mills Trade Guild.

The rice market in Brazil has a lot of demand and firm prices. Uruguayan exporters are selling rice to Brazil but Brazilian importers are asking only for shipments that can be delivered rapidly and Uruguay’s exporters have other trade commitments that they must meet at the same time.

According to Mr. Crosa, “the problem in [the industry] was that if the tax was finally voted in, someone was going to pay. Importers were taking this into account and if they couldn’t pass higher prices onto consumers they were going to force our prices lower”.

Prices in Brazil today are much more attractive for Uruguayan rice mills that those in other markets. Also, sales to Brazil can be transported by truck which lowers logistics costs.

Crosa emphasized that in addition to Brazil, Uruguay is selling rice to Iraq, Peru, and parboiled rice to the European Union. There also smaller volume sales to many other countries.

2013 Uruguayan rice cultivation uncertain

The planting area for next year’s harvest still has not been estimated and rice producers are betting that the latest rains will leave the irrigation reservoirs in better condition. Water levels still have not completely recovered from Uruguay’s recent drought. The amount of water stored in reservoirs limits how much rice can be successfully cultivated.

This Uruguay Business Reports news article is a translation of an article that appeared in the Uruguayan newspaper Unoticias. The original article in Spanish is available here. Uruguay Business Reports translation by Donovan Carberry

Uruguayan rice growers hurt by high production costs

Arbitration with mills postponed until July 10th

The provisional price set by growers and millers for 50 kilos of rice,of $12.20 USD, “will not cover the costs of production” according to the Rice Cultivators Association (ACA) which calculated an average loss of $175 USD per hectare.

The provisional price arises from the application a the table included in contracts between cultivators and the industry. The value is defined by the percentage of the average export price (FOB) for a metric ton of cereal.  This system was created by producers incase the value proposed by millers was significantly below their expectations.

The price that growers’ accounts will be credited with up to June 30th is $12.20 USD, to which $0.18 USD, half the tax refund, will be added. It will not include the full refund because the amount of rice brought to harvest by June 30th will not be 50% of the total harvest. Only 27% has been sold so far which is a historic low for so late in the harvest.

The ACA Assembly announced these number with great concern since, on average, growers will lose money.

“The moment we are passing through in the sector is worrying.  Last year, we noticed that international prices were staying very flat, which continued again this year but the costs keep rising and have reached levels that make cultivation unfeasible for a large number of producers” said the president of the Rice Cultivators Association, Ernesto Stirling. The ACA is projecting this harvest will produce a negative result with production costs of $2.012 USD per hectare.

“Costs are becoming very inelastic; if the producer uses less fertilizer, irrigates later, or uses less herbicide, it immediately translates into lower yields. It’s a dead-end” admitted Stirling. The arbitration began June 1 and this week the cultivators asked for a 10 day extension until the 10th of July.

This Uruguay Business Reports agribusiness news article is a translation of an article that appeared in the Uruguayan newspaper El Pais. The original article in Spanish is available here. Uruguay Business Reports translation by Donovan Carberry.