California Rice Farmers Harvest Crop of Losses

By Evelyn Iritani

Dec. 4, 2005 12 AM PT

Times Staff Writer

COLUSA, Calif. —

Chip Struckmeyer’s rice farm is a model of 21st-century efficiency. With the help of his son and a manager, he farms 485 acres of sticky clay soil, hiring planes to fly in seed at planting time and using high-tech laser equipment to level his fields.

Last year, thanks to favorable weather, Struckmeyer and other California rice growers produced a record crop of high-quality short- and medium-grain rice, much of which went to Japan.

But those ample supplies, plus competition from Asian suppliers, kept rice prices 30% below those of the previous year, while the cost of fuel and fertilizer soared. Even with tens of thousands of dollars in aid from the government, the Colusa farmer figures he lost at least $100 an acre. Rice prices have risen this year, but he still doesn’t think he’ll make up last year’s losses.

“Even if right now we could sell 1 million more sacks of rice, what’s the benefit if the price is below the cost of production?” asked the 57-year-old Struckmeyer, who is cutting back his rice acreage and shifting to high-value medicinal plants and herbs such as lavender, basil and rose geranium.

Here in the rich Sacramento Valley, the nation’s second-largest rice-producing region, free trade is losing its luster. Though U.S. farm exports are rising, imports are growing even faster, putting the U.S. on track to register its first trade deficit in agriculture in nearly five decades.

Fifteen years ago, the U.S. had a 20% share of the global rice market. Today that has dropped to 12%.

As the nation’s leading exporter of farm goods, California has a huge stake in the effort underway in the 148-member World Trade Organization to get the world’s richest countries to give up billions of dollars in farm supports in exchange for increased access to other markets.

If successful, the Doha trade round could dramatically reshape global agriculture trade. Heavily protected producers in rich and poor countries would be undercut as more-efficient farmers emerge in countries such as Brazil, Argentina and parts of Southeast Asia. High-cost producers would be forced to move out of lower-paying commodity crops and into niche markets.

The double-edged sword of trade liberalization can be seen in California. California farmers received $5.3 billion in subsidies from 1995 to 2004. But more than 90% of the state’s farmers grow crops such as oranges and nuts that receive almost no government aid and would benefit from market-opening measures.

California citrus producers, for example, face tariffs as high as 50% in China and compete against European farmers, who receive large tax rebates and other government subsidies. “We are significantly disadvantaged at this point,” said Mike Wooten, vice president of corporate relations for Sunkist Growers Inc., a grower-owned marketing cooperative.

Rice farmers aren’t happy about being labeled big-time recipients of corporate welfare, but they don’t apologize for taking the government’s money. They say it is the only way they can survive when they face such high trade barriers in other countries and high production costs. Rice, which requires large amounts of water, fertilizer and land, costs four times as much to produce as corn or soybeans.

Last year California rice farmers received $140 million in subsidies, an average of $37,089 per recipient, according to the Environmental Working Group, an organization based in Washington that has been a chief critic of farm subsidies.

Don Bransford, who produces rice, almonds and prunes on 900 acres of land near Colusa, said he would be more than happy to relinquish his government paycheck if he knew Japan and other large rice consumers were following suit.

“Market access is really important to us,” said the fourth-generation farmer.

“But the government seems more interested in making deals than enforcing existing agreements.”

Japan is emblematic of dashed expectations in the California rice industry. A decade ago, California growers celebrated when U.S. officials negotiating the last big trade deal, known as the Uruguay round, persuaded Japan and South Korea to crack open their lucrative markets to imported rice.

California now sells 300,000-plus tons of rice to Japan a year, making it the state’s top export market. But to protect its farmers, the Japanese government buys up that rice and stores it in a warehouse or sells it to industrial users, who use it in flour, sake and other products. Similar restrictions exist in South Korea and Taiwan.

Because California farmers can’t sell directly to Japanese consumers, they haven’t been able to exact a premium for their high-quality, high-priced product. In Turkey, for example, customers will pay as much as $200 a ton more for the Cal-Rose label because of its reputation for quality.

“Japan at every corner has tried to block access,” said Kirk Messick, vice president of marketing for Farmers’ Rice Cooperative in Sacramento, which handles 25% of the state’s rice production and is one of the nation’s top subsidy recipients. Farmers’ 900-plus growers collected $143 million in government aid from 1995 to 2004.

Messick knows farmers are steaming about last year’s low rice prices, which he blamed on overproduction. But he said a global trade deal was the best and perhaps only way to force Asian governments facing strong resistance from their own powerful farm lobbies to open up their markets faster.

If the trade talks collapse without the promise of expanded access in Asia, California growers will find it increasingly difficult to keep their existing markets, Messick warned. China has shipped small amounts of rice to its Asian neighbors because of booming domestic demand. But he said that could change quickly, as U.S. growers of apples and broccoli discovered when they were undercut by cheap Chinese produce in Asia.

“China is the low-cost producer,” Messick said. “China could buy off the market and squeeze us out completely.”

If a trade deal is concluded in the next year, it would have to be approved by Congress. Trade experts said any changes to U.S. law probably would be contained in the farm bill, which comes up for renewal in 2007.

U.S. trade officials have said that the Bush administration was working to ensure that farmers who lost direct support would be able to receive government assistance in other ways, such as programs that reward environmental stewardship and conservation.

That could be good news for California farmers, who have adopted greener growing practices in response to high land costs and stiff environmental regulations.

Ken Cook, president of the Environmental Working Group, toured several rice farms near Sacramento and said he was surprised by what growers had done to improve the quality of their water runoff and make their acreage more hospitable to birds and other wildlife.

“The area was just full of animals,” he said. “It was unbelievable.”

Greg Massa is trying to implement “sustainable farming” techniques on the 700-acre farm he works with his father outside Hamilton City. The 35-year-old farmer doesn’t spray pesticide on the edges of his fields, and he bales his rice straw instead of burning it. In the winter, he floods his fields to provide a temporary habitat for migrating waterfowl. He has also started growing organic rice.

But Massa, a fourth-generation rice grower who lives with his wife, Raquel, and three small children in a house that they built from straw bales, worries that his life isn’t sustainable in a global marketplace ruled by efficiency and cost. The Sacramento Valley has some of the state’s highest unemployment rates, and more and more farmland is being plowed under for housing.

“This cultural shift going on because of globalization, I just don’t like it,” Massa said. “I don’t see myself in competition with Korean rice farmers. What I want is for all of us to be paid adequately.”

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Top recipients

U.S. recipients of rice subsidies, base of operations and total amounts from 1995 to 2004

Company: Riceland Foods, Stuttgart, Ark.

Subsidy (In millions): $505.6

Company: Producers Rice Mill. Stuttgart, Ark.

Subsidy (In millions): $295.0

Company: Farmers’ Rice Cooperative, Sacramento

Subsidy (In millions): $143.5

Company: Missouri Delta Farms, Sikeston, Mo.

Subsidy (In millions): $22.9

Company: R. Gorrill Ranch Enterprises Durham, Calif.