If Japan OKs U.S. Rice, Can State Cash In? : Agriculture: At the same time that Tokyo is showing signs that it may allow some imports, California growers are having to curb production.
Rice farmers in the Sacramento Valley are getting a lot of grief these days, but a little help could be on the way from an improbable new market--Japan. That is, if the state’s rice industry can get ready to take advantage of the opportunity.
Tokyo’s total ban on rice imports appears on the verge of cracking at the same time California rice production is undergoing a severe contraction.
Farmers are under heavy pressure from urban interests and state bureaucracy to cut back cultivation because they appear to consume water lavishly during times of drought. Environmentalists attack them for polluting streams with herbicides and filling the winds with smoke by burning rice straw after the harvest. And government incentives to export rice under federal food-aid programs are drying up with the budget squeeze.
Production peaked during an export boom in 1981, when more than 600,000 acres were under cultivation in California. About half that, an estimated 275,000 to 320,000 acres, is planted this season. Industry leaders calculate that the impact of rice on California’s economy had shriveled to about $540 million by the late 1980s from $1.5 billion in 1981.
Larry Grell, a third-generation rice farmer in this tiny crossroads community south of Chico, decries the confusion imposed on his farm planning by the capricious demands of federal subsidy programs and state irrigation policies. This spring he had to leave one of his fields half-cultivated because of a switch in water rules. Only 600 of the 1,500 acres owned by his family grow rice this season. The rest lie fallow.
“The easiest part of being a farmer is going out into the fields and doing physical labor,” Grell said. “All the stress comes when you try to deal with the uncertainty of running your business under government control. We farmers are the last to know what’s happening to our own property.”
Equally difficult to plan for is the opening of the Japanese market. No one can say it will happen for sure, and industry leaders disagree on what, if any, benefits will arise or how to strategize for market penetration when the time comes.
Prevailing diplomatic signals suggest that Tokyo’s leaders have resigned themselves to a limited opening of Japan’s 13-million-metric-ton rice market, the world’s largest and an ironic symbol of the kind of protectionism that Japan has practiced at home while enriching itself exporting to free markets.
If and when multilateral negotiations before the General Agreement of Tariffs and Trade (GATT) overcome the impasse on liberalizing agricultural trade, the Japanese are considered likely to agree to an initial 3% to 5% quota while retaining the right to impose steep but gradually declining tariffs.
GATT negotiators hope to reach an accord in the pending Uruguay Round of multilateral talks by the end of the year, but the Europeans are proving even more recalcitrant than the Japanese in defending their system of agricultural subsidies. If the GATT round fails, the U.S. rice industry is likely to resurrect a bilateral “unfair trade” complaint with the Bush Administration, which has pushed the industry’s cause aggressively.
“It’s an egregious kind of protectionism,” said Deputy U.S. Trade Representative Julius Katz, who is negotiating for the Americans on rice. “We think they need to open their market. If it opened today and we couldn’t produce enough rice, then that’s our fault.”
Few observers deny that California has a comparative advantage as a global contender for the lucrative Japanese market, where prices to the consumer are calculated variously at five to nine times those in the United States.
Among U.S. rice-growing areas, only the rich clay soil, the long growing seasons and the dry, hot climate of the Sacramento Valley have been proven to grow a quality strain of medium-grain japonica rice, the sticky variety that the Japanese grow and eat. Rice belts elsewhere in the United States grow four times as much of the crop as California, but it’s all the indica variety, the dry and fluffy long-grain rice regarded as unsuitable to the Japanese palate.
Australia grows medium-grain japonica, but not the premium “Calrose” rice that would be most competitive in Japan, growers say.
Yet California rice farmers’ ability to provide a reliable supply of grain to the Japanese, whose argument against imports centers on “food security,” may be at the mercy of the state’s water-distribution policies.
“If we continue to have a drought in California, forget exports,” said George Okamoto, president of Burlingame-based Nomura Co., a rice marketing firm that distributes the premium Kokuho Rose brand. “Eventually we’ll see a partial opening in Japan--I just hope it comes after the end of the drought, because I need to take care of my domestic customers first.”
Kokuho Rose is a household word in Japan and is widely regarded as matching the taste and quality of the best varieties of domestic Japanese rice, even though it’s not legally available there. The brand is the top seller in the ethnic market in California, and Japanese tourists have for years made a game out of smuggling it past vigilant Tokyo customs officials.
Okamoto’s product could easily gain ground if shipped to Japan in packaged form, but California rice exports have traditionally been in bulk, as a commodity. About one-third of the 900,000 metric tons of California rice milled last year was exported in bulk, mostly to Turkey and Jordan. Until the early 1980s, about 80% of the crop was typically exported as a commodity, seeking the highest prices in world markets or flowing into such federal programs as “Food for Peace.”
How Japan would fit into an international system of rice-dealing is an important question. A rigid system of government control over prices and distribution will be slow to dismantle.
“We really don’t know what access means until we see how the market is going to work,” said Ralph S. Newman, president of the Farmers’ Rice Cooperative, a commodity-oriented milling and marketing company in Sacramento.
“The simplest way would be to ship bulk brown rice to them,” Newman said. “But that assumes we can integrate into their existing structures and sell the grain.”
Appealing to increasingly sophisticated consumer tastes with new choices in rice products will be the ultimate marketing challenge for California producers, said Jack Kenward, spokesman for the the Rice Growers’ Assn. of California, another large farmer-owned milling and marketing concern.
“We want to give the Japanese the kind of rice they don’t already have,” said Kenward. “They may not eat it every day, but we think we’ll find a spot for it on their shelves.”
Rice Farming in California
The amount of land devoted to rice farming in California is on the decline-partly in the last three years because of the drought, but also because of the disappearance of export markets since the early 1980s.
In thousands of acres Source: Farmers’ Rice Cooperative, Rice Growers Assn. of California
