MARKETING STRATEGY ALTERNATIVES FOR TEXAS RICE
A Report to
THE AMERICAN RICE GROWERS
COOPERATIVE ASSOCIATION
Lake Charles, Louisiana
December, 1971
Texas Agricultural Market Research and Development Center
in cooperation with The Department of Agricultural Economics and Rural Sociology
Texas A&M University Co 11 ege S ta t ion, T exa s
~.
~.
71
On the average, the ARGA firms have twice as much drying capacity as the
corporations, and also twice as much operational storage capacity. Many members
of ARGA have their own drying and storage facilities, but sell their rice
through the association sales offices. The average volume of rice sold
through the ARGA firms, during the past five years, was almost twf.ce as much
as the volume dried and/or stored i.n their facilities.
From the standpoint of average volume of rice sold by the firms, the
ARGA members and local independent cooperatives had about the same volume
last year, averaging 1.5 and 1.6 million cwt. each respectively. However,
with average sales of 384,000 cwt., the typical corporation and partnership
firm sold only one-fourth as much. Sales of the ARGA firms were growing.
Their average sales volume in 1969-70 was more than 50 percent above that of
their 1965-66 season.
The ARGA firms reported an average of 104 members. The three in
dependents providing information reported an average of 202 members.
Membership of the independents was classified by management as mostly of
the tenancy classification, whereas ARGA members were more equally comprised
of owner-producers and tenants.
Managers of all firms reported that virtually all the rice they han
dle was first offered for sale, by the owners through the public bid procedure.
Between 75 and 85 percent is sold in this manner. The remainder is sold
through privately negotiated trade. The sales fee reported charged by the
firms averaged 5 cents per cwt., for both the ARGA members and corporations,
and 3.1 cents by the Independent cooperatives.
Comments from interviews with dryer-warehouse firms can be found in
Appendix 11. (Plus responses to selected questions.}
THE TEXAS AGRICULTURAL MARKET RESEARCH AND DEVELOPMENT CENTER
An Education and Research Service of the
Texas Agricultural Experiment Station and the
Texas Agricultural Extension Service
The purpose of the Center is to be of service to agricultural producers, groups and organizations, as well as processing and marketing firms in the solution of present and emerging market problems. Emphasis is given to research and educational activities designed to improve and expend the markets for food and fiber products related to Texas agriculture.
The Center is staffed by a basic group of professional agricultural and marketing economists from both the Experiment Station and Extension Service. In addition, support is. provided by food technologists, statisticians and specialized consultants as determined by the requirements of individual projects.
Robert E. Branson, Ph.D. Coordinator
William E. Black, Ph.D. John P. Nichols, Ph.D. Associate Coordinator John J. Seibert, M.S.
Charles Baker, M.S. Carl E. Shafer, Ph.D. Chan C. Connolly, Ph.D. Thomas L. Sporleder, Ph.D. Robert L. Degner, M.S. . Randall Stelly, Ph.D. Johnny Feagan, M.S. Edward Uvacek, Ph.D.
William J. Vastine, Ph.D.
69
Services of American Rice, Inc.
The grading services of American Rice, Inc., although only a couple
of years In existence, Is already widely used by both producers and dryer
storage managers with a high degree of satisfaction. Although rough rice
buyers still insist on rubbing each sample and making their own quality
determination, this service has already resulted in improvement of the
grading system.
The more ambitious program of American Rice, Inc. of establishing and
maintaining a current accounting of all rough rice deliveries by variety,
grades, milling y*eld and other quality factors, and sales with buyer Iden
tity, prices, lot Identity, etc., could, if successful, completely revolu
tionize the rough rice marketing system. By making available current and
composite data on mills' position, acquisitions, prices paid by variety
and grade, etc. as well as the current stock situatio~ marketing firms and
individual rough rice owners would be in a position to make decisions based
on facts never available before. In fact, one of the areas most frequently
mentioned by dryer-storage operators as being a major problem is the lack
of a daily-compiled market information on sales volume, prices paid, quality
being purchased, stocks on hand, etc.
If the information that Is contemplated to be furnished through this
program can be made available to rough rice producers and storage operators
within 24 hours ......... or before the deadl ine for acceptance or rejection of the
p revi ous day I s bids _..... th I s wou 1 d be of tremendous va Iue to the se 11 e rs .
Sellers would then, In fact, be In position to make a decision based on facts
rather than on guesswork.
TABLE OF CONTENTS
Page ACKNOWL EDGMENTS ...................... " .............................. " ........ .... " ........................... ..
PREF ACE .................... " " ............ " .... " ....................................... " .................. " ........ ..
BAS I C I NDUSTRY TRENDS AND PROJ ECT IONS. . . . . . . . . . 7
Consumption Profi le and Projections......................... 7
Total Uti llzation ........................... " ................................ " ........ ".. 8
Uti 1i za t i on by Ma r ke t .... " ........ " .................................... " " ........ " .. 8
Expo rt Ma r ke t .... " .... " ...... " ...... " .. " ........................................ " .. " .. " .. 11
Domes tic Market Tota 1. . . . . . . . . . . . . . . . . . . . . . 15
Domestic Market - By Regions ............ 17
Consumption - By Product Type ................... 21
Rice Supply ............................. " ................ " ............ " .. " ........ ".................... 25
By Area ............ " ............ " ........................................ " ...................... ".. 25
Allocation of Texas Supply to Major Markets ....... 28
Allocation of Supply by Major Processed Types ... 28
Supply by Grain Type ............... 30
MARKETING PROGRAMS - ARKANSAS AND CALIFORNIA..... 33
The Arkansas Ri ce Growers.................................. 33
The Producers Cooperative.................................. 41
The California Rice Cooperatives........................... 43
The Rice Growers Assoc i at j on of Ca 1i forn i a. . . . . . . 47
MARKET ING PROGRAM - TEXAS....................................... 54
Rough Ri ce Transport and Storage,.......................... 56
Attitudes Concerning Co-mingling of Rough Rice............. 57
Milling Operations.......................................... 59
Marketing Milled Rice Products............................. 59
Future Direction in Milled Rice Product Marketing.......... 61
TEXAS RI CE DRYER - WAREHOUSE SURVEy............................. 63
Increased Volume Through Co-mingling....................... 64
Source and Adequacy of Market Information.................. 64
OPERATIONAL PROCEDURES FOR RICE SALES........................... 68
Services of American Rice, Inc............................. 69
Financing........................................................ 70
Other Characteristics...................................... 70
67
established with buyers, and doing a good job on grading; and (6) encouraging
orderly marketing.
Managers feeling a lack of any influence on producers prices stated
that there are two main requirements for increasing Influence on prices
that are the establishment of a central sales office, to handle most of
the rice produced in the state, and a tighter organization of Texas producers.
All the managers interviewed, both cooperative and corporate firms,
feel that they have some influence on individual producers in marketing
their rice. In dealing with producers, Influence is generated by the follow
ing: (I) making available to producers all the current sales and market
information at hand; (2) furnishing advice concerning prices, quantity,
~~. quality and grade, market and loan value; (3) explaining alternatives
available; (4) advising owners of rice to accept or reject bids offered
(farmers will usually ask the organization for advice and in most cases
follow the opinion of the sales manager).
Whi Ie the managers' views of regional headquarters information system
indicated some problem~ It was almost unanimous that legislative represen
tation and assistance was one of the more beneficial services provided by
the regional office.
Page
MILLER COST AND MILLER OPINIONS - FROM PREVIOUS STUDIES 72
MILLER TO RETAIL OUTLET MARKETING OF RiCE 76
MARKETING ALTERNATIVES FOR TEXAS AND LOUISIANA RiCE 81
The Rice Market in Perspective 81
The Eight Step Ladder of Marketing Alternatives 89
Evaluation of Alternatives 91
Rough Rice Sell ing Under Mi 11 Grades........................ 91
Rough Rice Sales Using A.R.1. Grades ........................ 92
Rough Rice Sales Using A.R. I. Grades and Market Information. 93
Rough Rice Cent r a 1 Sa 1 es Agency............................. 95
Rough Rice Central Sales With Bargaining 96
Milling With Sales to Non-brand Markets ..................... 97
Milling With Sales to Brand and Non-brand Markets 102
Milling With New Product Development. ....................... 103
Conclusions and Recommendations 103
APP EN 0 I X I.......................................................................................... 101
AP PEN 0 I X I I .........................................................................................-. 11 3
APPENDIX III ................. 123
APPENDIX TABLES .......... 131
-~
65
Sales tabulation sheets are also received from other cooperatives and sales
agencies in Texas and Louisiana.
Irregardless, most operators and managers feel that the .market informa
tion received is very unsatisfactory. It reaches them too late, is not
current enough, and lacks sufficient detai 1. Wanted are more statistics
and information on volume sold, and movement in both the rough and clean
rice markets. More current information on both the mills' needs and purchases-
the position of the mills (long or short) regarding quantity, quality,
etc., would be helpful. Daily price information~prices offered and those
accepted- is another need frequently expressed. The ARGA weekly newsletter
is not timely enough, nor is the information usually in sufficient detail.
Individual producers usually obtain their market information from the
same sources as the management of drying-storage establishments. In addi
tion to the weekly ARGA newsletters, and sales tabulation sheets some
organizations post price and sales information on local facility bulletin
boards, as well as by personal contact and telephone.
The schedule of storage charges for rough rice ranged from a flat
charge of 21 cents per cwt. up to April 30, to a varying monthly charge
amounting to 35 cents per cwt. by April 30. The average storage charged
by cooperatives amounts to 26 cents per cwt. up to April 30, compared to
an average of 33 cents for storage in facilities under corporation type
of ownership.
Most organizations, both cooperatives and those under corporation
type of ownership, furnish additional services for rice growers besides
drying and storing rough rice, and furnishing market information when
LIST OF TABLES
Table
Rice Acreage t Yie1d t and Production in Texas t Louisiana t and Arkansas t 1959-69................................
Page
2
2 Average Price Per Cwt. Received by Farmers - Rough Rice.. 3
3 Index of Prices Paid by U.S. Farmers...................... 5
4 Rice Milled: Supply and D~stributiont United States t 1956-68. .. .. .. .. .. .. ... .... .. .. ... .. .. .. .. .. .. .. .. .. .. .. ...... ... .... .... .. .. .. .. .. .. .. .. .... .. 9
5 Rice Utilization by Major Markets t 1959-68....... 12
6 u.. S.. Rice Expo r t s .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 13
7 Rice: Per Capita Civilian Consumption and Retail Price United States t 1955-69........... 16
8 Percentage and Per Capita Distribution of Milled Rice in the United States t by Region, Selected Years t 1956-66.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .... .. .. .. .. .. .. .. 19
9 U.S. Domestic Utilization of Rice for Selected years .. 22
10 Manufacturing Uses of Rice, United States Selected Years, 1956-66. .... .. ...... .. ........ ... .. ...... .... .. .. .. .. .. .. .... .... .... .... .... .. .. .. .... ...... .. .. 23
'I Estimated Market Snare by Type of Rice United States, 1970................................................................................... .............. 23
12 Mill Shipments of Brown and Milled Rice by Type..... 24
13 Rice Distribution for Domestic Market t by Package Size, 1967-68.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 26
14 Rice Production in Texas, Louisiana, Arkansas, and California, 1959-69..... 27
15 Market Allocation of Texas and Total Southern States Ri ce 1968-69 ....................................................................... .-........ 29
16 Shipments of Rice, by Type, from Southern Mills ... 31
17 Rice Production by Long, Medium, and Short Grain Type by State, 1969 with Comparisons ... 32
63
TEXAS RICE DRYER - WAREHOUSE SURVEY
Information on rice drying and storage operation was obtained through
personal interviews with management personnel of 25 firms. In listing the
major problems facing them, the responses of managers of all three categories
(ARGA, independent cooperatives, and corporation and partnership) centered
around the following difficulties:
1. Inadequacy of the market information available to them: a strong
need was expressed for more complete, accurate and timely information
on such factors as prices, sales and movement, stocks on hand,
relative market strength, and related indicators.
2. The complicated and inadequate grading system--along wi,th an im
proper sampling system.
3. The labor sltuation--difficulty in obtaining skilled labor.
4. Having more rice arrive than can be handled at the dryer, during the
height of the harvesting period.
The problems that producers reportedly mention to dryer-storage mana
gers inClude the matter of not being able to make the best decisions in
selling their rice -- due to lack of price information, market condition,
accurate determination of rice quality, etc. Some feel that the mills
(buyers) are too discriminating in their quality evaluation when purchasing
rough rice, wh! Ie others complain about the time span between date of sale
and date of payment for the ri ce by the buyers. Of course" the ever present
complaint about low prices and high production costs came in for its share.
Most managers i ntervi ewed, in all three class i fi cati ons, C;),f ownershi p,
~ realize the need for co-mingling rough rice and feel that this, and a central
- ~
Table Page
18 Shipments of Milled Rice by Market and State Average
for Four Seasons (1956-66 through 1968-69) ... 38
19 Market Distribution of U.S. Rice Sales .................... 82
20 Markets for Rice (For a 500 Cwt. Per Hour Mill Using
National Sales Profile) .............................. 83
21 Market Distribution of a Five Million Cwt. Mill ... 84
22 Examples of Sales Potential in Selected Advertising
Ma r ke t s " " " " " " " " " " " " " " " " " " " " " " " " " .. " " " " " .. " " " " " " " " " " " " " 86
23 Further Examples of Advertising Market's Potential . 87
24 Cost of Selected Advertising Markets ... 88
25 Wholesale Prices of Rice by Type Marketed at Retail
level Dallas, Ft. Worth, Houston, Texas June 1970 . 90
26 Rice Exports, Dollars, and P. l. 480 Quarterly,
~
1963-4 to 1968-9."""",,""""""""""""""""""""""""""""""" 98
27 Average Prices, By Quarters, Received for Rice 1963-69
Average. " " " """ " " "" "" " " " "" " "" " """ " " " """ " " " " """ "" """ " "" 100
28 Average Prices Received for Export Rice, By Quarters, 1963-4 to 1968-9."""",,""""""""""""""""""""""""""""""" 101
61
The industrial use market is very price conscious. Purchases are made
on a specification basis. Contracts may be made for from three months up to
a full year. Prices are normally set at the time the contract is set up.
Often no formal contract Is written but rather a normal order form Is used
for these sales.
Exports under the P. l. 480 program are made on a bid basis. Here again,
price is of the utmost importance. Exports to dollar markets allow a bit more
flexibility. Some branded product may be exported to dollar markets. Brown
rice also makes up a significant portion of the exported rice to dollar markets.
Mills in the Houston area operate in the export market in much the same way as
do mills in Arkansas and louisiana. They do, however, have an advantage over
the Arkansas mills in terms of transportation charges to the point of export.
Future Direction in Milled Rice Product Marketing
Several of the mill managers interviewed were asked their opinion con
cerning the future for milled rice products. It was generally agreed that
convenience oriented products are here to stay. In addition, it was agreed
that there would be an expanding market for rice mixes and specialty rice
products. Further expansion was not expected in the USe of parboiled rice,
except in the Institutional trade.
It appears that Texas mills themselves will not be moving dramatically,
within the near future, into further processed rice products. With only one
exception, the mills felt they were not large enough, nor do they have the
marketing expertise, to introduce new products successfully into the consumer
market. The major national food manufacturers will continue to be the major
LIST OF FIGURES
Figure Page
U.S. Rice Production-Utilization 1959-1968 and Projections ..................................... 10
2 U.S. Ri ce Exports......................................... 14
3 Per Capita Distribution of Rice in 1966-67 ..... 20
59
Mi 11ing Operations
In general, the millers or the mill representatives would not discuss
in any detail their mill operations or milling cost. All except one mill
produce regular white mi lied rice. In addition they all also produce par
boiled rice. Only one of the five mills produces pre-cooked instant rice
in any quantity.
The regular milling operations generally run on a two or three shift
basis five days a week for the major part of the year. The parboil operations,
however, run on a seven day a week basis. Those mills which have a signifi
cant share of the domestic consumer market have a continuous demand for
milled rice products throughout the year. The workload for the other mills
-~ necessarily varies up and down as they ,receive contracts for milled rice
products. They do, however, try to maintain a continuous milling operation.
In many cases there may be some times during the year when they have to be
satisfied with performing the milling operation merely to cover their variable
costs and contribute something towards spreading fixed costs.
Marketing Milled Rice Products
Because of the competitiveness of most Texas mills in the domestic market,
mill representatives are somewhat reluctant to discuss milled rice product
marketing. A reasonably clear picture, however, is available.
It is well known that some Texas mills have a substantial amount of con
sumer acceptance in the domestic market. Other Texas mills depend mainly on
exports, including P. L. 480 rice sales.
ACKNOWLEDGMENTS
This study was done under a research grant from The American Rice
Growers Cooperative Association and conducted by a task force of the
Texas Agricultural Market Research and Development Center. The
personnel involved included the following:
Robert E. Branson Texas Agricultural Experiment Station
W. E. Black Texas Agricultural Extension Service
John P. Nichols Texas Agricultural Experiment Station
Randa 11 Stell y Texas Agricultural Experiment Station
All personnel of the task force are also staff members of the
Department of Agricultural Economics and Rural Sociology at Texas A&M
University.
57
the Houston area may also be used. Some mills actually store rice for other
mills in Houston.
The dryer-e 1evators usua 11 y a 11 ON 15 days for the mills to remove the
rough rice after it has been purchased. It is apparent that some dryer
elevators are more strict on this requirement than others. It is generally
true, hONever, that all the dryer-elevators require that all rough rice be
removed by the end of April or early Hay. At this time they close dONn
their operations for maintenance and installation of equipment for the
next season. This policy poses a hardship on those mills with limited
storage capacity of their ONn. They must then move rice to other storage,
and handle it a second time to get it to the mill.
The storage capacity available to the mi lls can affect thel r purchasing
pattern. By purchasing rough rice in a highly organized manner during the
season, a mill can achieve substantial annual savings in storage costs.
Consideration must be given jointly minimizing storage charges, on the other
hand, and consider price variations of rice during the season to minimize the
purchase cost.
Attitudes Concerning Co-mingling of Rough Rice
In Texas, the subject of co-mingling rough rice is presently controversial.
It was the general opinion of all the millers interviewed that some quality
factors would have to be sacrificed if rough rice were co-mingled. Some felt
that the problem is not insurmountable while other millers felt that their
standard quality could not be compromised by allONing this co-mingl ing at the
-~ dryer.
MARKETING STRATEGY ALTERNAT IVES FOR TEXAS RICE
(A Task Force Report)*
PREFACE
From 1959 to 1969, rice acreage in Texas increased an average of
13.1 thousand acres per year. Production expansion meanwhile averaged
850 thousand cwt. per year, Table 1. Compared with the 1967-69 levels,
the annual rate of gains are near 2.4 and 3.4 percent per year respectively.
United States population meanwhile, measured in a comparable manner,
recorded an average annua.l growth of only about 1.3 percent. Thus, Texas
production has increased at a rate about 2.6 times that of population
.~. growth during the last decade. Comparable production gains have occurred
in both Louisiana and Arkansas, which are also major rice-producing states,
Table 1. Meanwhile, rice consumption in the United States during the
1959-69 decade moved from 5.0 pounds per capita to an estimated 8.3 pounds.
This is equivalent to a gain of 4.1 percent per year In relation to recent
consumption levels. This gain is important, causing less pressure on
foreign dollar exchange markets for rice, as well as P. L. 480 subsidized
exports.
Irrespective of the foregoing favorable gain in domestic market demand
for rice, prices received by Texas rice growers have not evidenced any
improvement. The average per cwt. was $4.94 In 1959 and $4.90 in 1968, Table 2.
*Robert E. Branson, Professor; W. E. Black, Economist - Marketing and Policy; John P. Nichols, Assistant Professor; and Randall Stelly, Associate Professor; Department of Agricultural Economics and Rural Sociology, Texas AsM University.
55
opinion among the Texas millers concerning the grading program for rough rice,
which has been developed by American Rice,lnc. It is designed to measure in
greater detail than present U.S.D.A. grades, the milling qualities of rice as
a basis for purchase contracts. Some millers doubted that it would be able to
reach a level of operation sufficient to gain their confidence. Other millers
felt that, given time, this program could provide the confidence mills need
when buying rice. Mills found field buying, admittedly, were not infallible
judges either in evaluating rice. The need for a better system is generally
conceded.
Purchase of rough rice on a certificate basis where the grade and certain
quality characteristics would be specified and guaranteed is viewed skeptically
by most mills. Nonetheless, representatives of two of the mills, however, could ~
see this potential as the direction in which the industry should move. That view
was qualified, however, by saying that an Improved level of confidence in the
grading system would be required. One suggestion was that the grading service
should be truly independent and, therefore, operated by an organization other
than American Rice, Inc. The millers in general also felt that they should
have more input into the deSign of the rough rice grading system and the uniform
rough rice sales policy. In their opinion, this would improve the milling
industry's confidence in the system, and thereby the chances for Its success.
Of the five mills operating tn Texas, only Blue Ribbon Rice Mi lIs is
organized as a cooperative. It has had experience in the past of operating
a pooling arrangement for rough rice. Management at Blue Ribbon, however,
generally felt that the pooling arrangements for rough rice did not work because
they were unable to maintain producer interest and enthusiasm for the program. ~
It is their opinion that producers prefer to sell their own rice and act as
their own decision-makers in the selling process. In addition, they feel that
3
Table 2
Average Price Per Cwt. Received by Farmers -- Rough Rice
Year louisiana Arkansas Texas Mississippi Ca Ii forn I a
1958 $4.96 $4.94 $5.00 $4.90 $3.81
1959 4.63 4.60 4.94 4.71 4.19
1960 4.50 4.41 4.85 4.88 4.43
1961 5.28 5.20 5.31 5.38 4.78
1962 4.88 5.10 5.03 5.25 5.11
1963 4.95 4.92 5.09 5.24 5.07
1964 4.84 4.87 4.94 5.20 4.92
~, 1965 4.79 4.98 5.04 5.06 4.88
1966 4.80 4.80 5.10 4.90 4.30
1967 4.91 5.12 4.94 5.34 4.84
1968 4.85 4.90 4.90 5.25 4.85
1969 4.94
1970 Jan. - April 4.80
Source: Statistical Reporting Service, U.S.D.A.
53
become the dominant factor price-wise (no need to control all the
crop in the state).
8. Dedicated field men capable Of furnishing advice and information
to membership on both production, marketing, prices, cooperative
organization and operation, quality factors, etc.
9. Good, honest management, and qual ified personnel for both internal
and external operations.
10. A sound public relations program that will obtain and maintain a
feeling of trust and confidence from member producers, other rice
industry groups, and the general public.
5
Table 3
Index of Prices Paid by U. S. Farmers*
Year Index
1959 298
1960 300
1961 302
1962 307
1963 312
1964 313
1965 321
1966 334
1967 342
1968 354
1969
1970 Jan. - April 388
*Al1 commodities, production and living
Source: U. S. Department of Agriculture, Statistical Reporting Service
51
Rice shipped to Puerto Rice is usually fully milled. However, the
polishing plant in Puerto Rico polishes the rice and packs it in consumer
size packages. This avoids taxes in Puerto Rico.
Most of their sales are F.O.B. San Francisco, through brokers. In
Puerto Rican shipments they use their own ship. This ship takes 39 days
for a round trip through the Panama Canal, so therefore it takes in a 39
or 40 day supply each time.
The Rice Growers Association does some parboiling at the Sacramento
plant--a rather small operation and crude by comparison to the Texas plants.
This parboiled rice is sold primarily to cereal processors. About 150,000
one-hundred pound bags of parboiled rice is processed per year.
The Association operates a seed rice program for its own members--seed
rice propagation and distribution. According to management, the objective
is simply to get better qual ity rice from their producers.
As of now, the association has added diversification into other operations.
Management feels that the best opportunity would be to go into other grains,
or into safflower, rather than in fertilizer, especially since the latter is
already strongly organized by other California cooperatives.
If the option were available again, the association would have only one
large, centrally located rice mill instead of the present four. Movement
into the drying and storage operation would have been accelerated, and on
a larger scale.
Consensus appears to be that the association has helped non-member
producers, as well as their own members, by maintaining a high price level
.~ and thus requiring the independent mills to pay the same. According to
7
BASIC INDUSTRY TRENDS AND PROJECTIONS
No potential program of marketing can be realistically evaluated
except in terms of present and emerging industry trends and marketing
opportunities. Consequently, it is absolutely essential that full and
careful consideration be given to these factors before any question of
marketing action is seriously addressed. Interest here is not in a
simple recitation of industry figures. Rather, the goal is toward a
careful examination of these, for identification of possible marketing
opportunities, and an analysis of Texas' strategic marketing position,
as a basis for new marketing program development.
Consideration first will be given to (1) rice consumption levels and
trends, by product type and mix, (2) rice supplies by states as to total,
type, and expectations, and (3) to an analysis of current marketing programs
for rice, by producing area, producers, processors and on an industry or
governmental basis.
Consumption Profile and Projections
Rice, as is well known in the industry, has several major consumption
utilizations or end markets. Principal among these are (1) the domestic
market, (2) dollar exports, and (3) government subsidized exports, commonly
referred to as P. L. 480 shipments. A view will be taken of the general
trends, importance, and expectations of the three market segments. Then
each will be considered in more detail.
49
delivery, another sample is taken and graded. The quality at the delivery
time may be better or less than the initial sample. If the sample grades
better than the original, then the farmer gets an increase in price. But
if the sample grades lower in quality, the farmer is paid less, and usually
the grower will take the matter up with the storage operator.
Storage operators are very careful, therefore, to not deteriorate the
quality of the rice they have in storage, since they are very interested in
keeping their customers.
The paddy rice becomes legally the property of the association at
harvest time. It will advance to producers at harvest, an amount averaging
about $1.75 per cwt., as soon as a warehouse receipt is obtained. This
advance is increased to an average of $3.00 by January 1. The January 1
payment is referred to as an equalization payment which reflects the value
of the rice according to the grade of the paddy. Following the January
equalization payment, monthly advances to producers are made until the
final settlement, which is usually in September. Storage charges average
four dollars per ton, or twenty cents per cwt. from the day of purchase,
or drying, to the day of delivery. Of course, farmers pay the drying charge.
Farmers prices are F.O.B. plant.
Ten cents per cwt. of paddy rice is retained for payment of common
stock. This common stock capital is issued in units of 1,000 cwt. Cur
rently 8 percent interest, or dividend, is paid on this common stock. The
association has over ten million dollars in common stock and appears to be
adequately financed through the members' equity.
))) Table 4
Rice Milled: Supply and Distribution, United States, 1956-68
Year Beginning AUQust
Beginning Stocks
SUPPLY Mill Product ion Imports Total
1956 11 ,338 35,173 268 46, 779
1957 3,967 30,523 164 3/f ,654
1958 5,343 30,438 114 35,895
DISTRIBUTION Civilian Consumption)Ending Used by ~hlpments MilitaryExports Total Per Capita Brewer- to Terri- Takings
ies
Stocks
tori es - - - I , )00 cwt. - - Pounds
3,967 3,549 25,637 3,871 80 9,675 5.8
5,343 3,348 12,754 3,960 135 9, 114 5.4
5,990 3,278 13,528 4,231 183 8,685 5.0
Beginning 50-State Basis
1959 5,990 34,843 550 41 ,383 3,052 3,488 20,327 3,630 90 10,796 6. 1
1960 3,052 36,928 203 40,183 1 ,943 3,482 20,643 2,835 127 11 , 153 6.2
1961 1,943 39,688 274 41 ,905 1 ,572 3,361 20,835 2,551 160 13,426 7.4
1962 1,572 43,275 27 44,874 1 ,478 2,911 25,190 2,970 117 12,208 6.6
1963 1,478 49,146 13 50,637 1,692 2,767 30,020 2,798 112 13,248 7.0
1964 1,692 51 ,041 338 53,071 1 ,995 3,095 30,489 2,820 154 14,518 7.6
1965 1,995 50,942 482 53,419 1,991 3,391 31 ,135 2,752 82 14,068 7.3
1966 1,991 58,382 6 60,379 1 ,684 3,828 37,432 2,764 100 14,571 7.5
1967 1,684 64,080 5 65,769 2,418 3,952 41,215 2,605 148 15,431 7.8
1968 2,418 65,240 8 64,943 2,723 4,214 41 ,000 3,090 150 16,489 8.3
1959-68 +88% +102% \J)
Source: The Rice Situation, U.S.D.A., Economic Research Service, March 1970.
47
The Rice Growers Association of California
The Rice Growers Association of California was organized in 1921,
basically as a paddy rice sales organization. It operated merely as a
sales organization for ten years, but in 1931 purchased their present mill
from the Louisiana State Rice Milling Company.
Rice Growers Association is now the dominant factor in the California
rice industry. As such, it inherits responsibility for market stability
for the whole industry. Rice grading is handled in their central grading
office. Management feels that good grading is the cornerstone of any
operation. As with the Producers Cooperative, Rice Growers samples the
rice first, and then pools it in the green state.
Management is not particularly striving to expand in size. The cooper
ative is already large enough to have sufficient force in the economy of
the California rice industry. The philosophy is that you don't have to
get rid of competition to do a good job for your producers.
Advantages of the organization to rice producers are, first, it affords
market stability to the whole California industry including producers;
second, it allows producers to maintain control of their product in the
marketing process; and third, producers have obtained a feeling of trust and
confidence in their association.
Seven field men are used. One in each district whose main job is to
help producers deliver a better quality rice and to help in maintaining
membership goodwill and relation.
There is no solicitation of new members, although new members will be .~
accepted should any producer wish to join. Independent mills will fight
11
a healthy 15.3 million cwt. or 84 percent, Table 5. However, because of
higher yields and increased U. S. production, an additional increase of
8.1 mill ion cwt. had to be market~d through P. L. 480, or soft money
channels. The latter market, though politically important to the United
States foreign policy, as well as domestic agricultural policy, should
not be taken as a sound, or primary basis for building a marketing program.
Reasons for this will become evident later.
The three major markets, as will be shown, cannot be viewed solely in
the aggregate. Each must be analyzed in terms of internal composition and
trends.
Export Market
Although total exports have increased substantially, examination of
recent changes do not portray a very optimistic situation for further
rapid expansion, Table 6. The only consistent growth is in the Oceania
market, one whose smallness contributes little impact upon the total export
outlook.
Analysis of the sales reveals that the major export gain has come in
Asia, predominantly a P. L. 480 subsidized market, Figure 2.
Africa and the Western Hemisphere markets have leveled out to a small
rate of increase. Furthermore, sales in these two markets have been quite
erratic. African sales averaged 4.2 million cwt. during 1959-68, but the
range was 5.1 million cwt., or 121 percent of the average. Western Hemisphere
sales had a range of 3.5 million cwt. compared to an average of 2.8 million
cwt. Thus its sales range was 125 percent of the average level.
45
Farmers Rice Cooperative has two classes of stock. One is a preferred
stock, at ten dollars per share, paying a six percent accumulative dividend.
The other is a token common stock of one dollar par value. Patron equity has
been carried under a ten-year rotation of five million dollars, on the average,
during this period, most of which is in preferred stock. Management was very
specific in its emphasis on the need for adequate capitalization.
Management's view is that the producer's advantage in being a member
of the association,stems from his assurance of a home for his rice, and the
additional returns he can receive from any economics in the handling and
milling of his product plus returns from mill by-products.
The question was raised as to what would be done differently, if there
were an opportunity to start it over again. The view was that the orgnaization
was kept too small, and too restricted, for too long. By going slow, any
advantage was lost that they could have had by being the leaders in the
industry.
Farmers Rice Cooperative presently has six field men scattered in the
rice growing areas of California. These field men try to be of as much
help and service to member growers as possible by furnishing information
about production techniques, prices, cooperative operations, and related
matters.
Management personnel emphasized the importance of obtaining qualified
personnel to operate such an organization. Required are personnel who
can meet c ri s is and deal wi th them sat i sfactori ly as they ari se.
Farmers Rice Cooperative has not diversified their operations into
fertilizer and other farm supplies on a horizontal basis, simply because it
))
Table 6
U. S. Rice Exports
Year Quantity $ Value Western Europe Asia Oceania Africa (cwt. ) ($1 ,000) Hemisphere
- - -cwt.
1958-59 13,527,544 97,621 4,629,933 2,478,884 4, 127 , 111 49,995 1 ,590,702
1959-60 20,326,859 103,506 4,783,081 2,263,470 10,049,747 63,971 1,532,640
1960-61 20,640,488 139,559 1,174,691 2,910,967 12,152,381 69,102 2,797,477
1961-62 20,834,836 135,140 1,374,268 4,409,709 10,458,920 95,627 4,496,312
1962-63 25,190,272 133, 157 2,608,613 3,372,448 14,563,781 139,411 4,506,019
1963-64 30,020,415 163,538 3,787,390 5 , 121 ,766 15,891,673 195,355 4,979,907
1964-65 30,488,646 215,116 3,579,741 3,382,485 18,630,993 232,569 4,662,856
1965-66 31,134,905 203,616 3,053,645 3,969,888 17,248,045 263,058 6,600,269
1966-67 37,739,534 221 ,506 3,529,687 5,432,548 24,079,714 287,292 4,410,293
1967-68 41,219,009 306,772 2,197,468 4,605,379 30,371,644 238,363 3,806,155
1968-69 39,977,455 338,997 2,255,342 5,244,077 28,068,559 325,986 4,083,491
TOTAL 311 ,099,963 $2,058,528 32,973,859 lf3 z191,621 185,6lf2,568 1 , 9bO, 729 lf3,lf66,121
1959-68 28,344 40,712 41,875 Total Avg. 2,834 4.071 4,187 Ranqe/average 125% 78% 121%
Source: U.S.D.A., C. & M.S., Annual Rice Market Summary for appropriate years. \.oJ
43
The California Rice Cooperatives
Two cooperatives in California market, between them, about 80 percent
of that state's production. The Farmers Rice Cooperative, in 1970, had about
850 producer members and the Rice Growers Association of California reported
approximately 1,770. The Far'mers Cooperative processes about 5 million
cwt. of rice per year compared with the Rice Growers Association of California
output of around 13 million cwt.
The Farmers Cooperative is now in its twenty-sixth year of operation.
Two primary reasons were given for organizing this cooperative. One was
the belief among some producers that a single cooperative in California
was not enough. Secondly, it was felt that the then dominant independent
r-. rice handler in California was not treating producers fairly, and Instead
was giving rice producers whatever minimum price It felt producers would
take.
Farmers Rice Cooperative Association started in 1944 with only 33
farmers and milled 300,000 barrels of rice. Leadership in forming the
association was provided by four or five of the largest California rice
farmers. It now operates two rice mills in California, as well as the
Farmers Rice Company of Puerto Rico. The Puerto Rican plant is operated
at cost, therefore, no profits are left in Puerto Rico.
Producer members sign a fifteen year contract with the association.
However, a member can resign anytime before February 15 of each year. All
members pledge to the association 100 percent of their crop for delivery
at harvest. Tenant operators as well as landowners are both members of the
association. Most of the rough rice is brought into the mills by truck.
15
Sales of U. S. rice to European markets have made favorable gains as a
result of concerted marketing efforts by mills, their brokers, U. S. government
market development effort, and that of the American Rice Council. Hard dollar
sales in this market averaged nearly 5.1 million cwt. per year for three
marketing years 1966-67 through 1968-69, or 59 percent more than the 3.2
million cwt. average for 1959-60 through 1961-62 seasons. Without increased
effort in the European market, gains may come more slowly for the 1975
planning horizon. It is a market where obviously every effort at sales
building should be continued.
Domestic Market Total
The domestic market for rice is the most stable sales outlet. As
may be noted from Table 5, the quantity sold in the domestic market rose
rather steadily from 10.8 million cwt. in 1959 to 16.5 million cwt. in 1968.
In the last several years, the domestic market has taken about 30 percent
of total U. S. production. The American Rice Council has been very active
in rice promotion in the United States market.
The per capita consumption of rice in the U. S. increased to a level
of about 8.3 pounds per year, compared to about 6.0 pounds ten years ago-
a 33 percent gain, Table 7. This upward per capita trend contributed most
of the growth in total domestic rice consumption rather than gains in total
U. S. population. In fact, in recent years increased per capita consumption
has accounted for about two-thirds of the total national increase in rice
usage. The other third came from an increase in population.
What the future holds for rice consumption is a matter of conjecture.
Quite possibly the current trend of an average annual gain of two-tenths of
41
matter to all eighteen local association boards, to obtain a general reaction
to the proposals.
The above is not to say that management has no bounds. Obviously, if
the net results of the programs espoused is not a final benefit to members,
membership will decrease. Producers, in other words, expect good results
in the annual and long-run perspective. It is up to management to produc
them, or else management would likely be replaced.
The Producers Cooperative
Another segment of the Arkansas marketing activity is under the direction
of the Producers Cooperative Association. Also headquartered at Stuttgart,
Arkansas, it operates almost solely within the Stuttgart vicinity. Such
geographic restriction reflects the fact that it only operates one dryer,
that being in Stuttgart. This is in sharp contrast to the eighteen dryers
ov~r the rice growing areas of the state which are a part of the Arkansas
Rice Growers Association.
Management of the Producers Association has many similarities, in
principle, to that of Arkansas Rice Growers. Most policy decision alterna
tives are worked out by management, presented to, and approved by, the board
of directors. Evidence of this is especially obvious now. The former general
manager of the association has recently retired. Prior management policy was
keystoned to keeping operations small geographically, but being large within
that particular territory. That policy was successfully achieved.
The new management has changed policy to one of expansion, development
of new dryers, and more direct state wide competition with the larger Arkansas
17
a pound per capita may be maintained. Future expansion depends heavily on
the specialty rices which are assuming an increasing share of the market.
It will also depend on a continuing flow of new rice products and their
acceptance by the consumer.
Based upon per capita consumption trends in the domestic market
during the past 15 years, projections were made to 1975 and 1980. Results
of the analysis produced the equation Y = 5.0 + .206 X (base 1955), where
Y = estimated consumption, and X = number years beyond 1955. It indicates
that consumption will reach 9.1 pounds per person in 1975 and almost 10.2
pounds by 1980. Domestic market civilian consumption of rice is now
approximately 17 million cwt. per year, compared to 11 million cwt. ten
years ago. Indications are that we can expect the 20 million cwt. level
to be reached by 1975, if not sooner, and possibly 25 million by 1980.
Included in these estimates are projected gains in population as well as
per capita use rates.
Domestic Market - By Regions
Although milled rice for direct domestic consumption is shipped into
all 50 states, distribution, both total and per capita, varies considerably
among states and by region. Shipments converted to a per person basis vary
from an annual average of 100 pounds per capita in Hawaii to less than one
pound in Wyoming. Besides Hawaii, other states with above-average rice
receipts per capita are Lousiana, South Carolina, Alaska, Arkansas, Texas,
Mississippi, Alabama, and New Jersey. On a regional basis, the Pacific,
Middle and South A,tlantic, and West South Central regions are the major
39
The domestic market sales by Arkansas Rice Growers assumes the following
division.
Domestic Market Share
Own brand label sales Private label Bulk to further processors
Major Minor Moderate
The trends appear to be, first, toward more sales of their own brand,
and secondly, those to national food concerns engaged in further processing
of national brand breakfast cereals, and finally, least increase is in the
private label area. It is felt that no organization can really gain anything,
in the long run, through P. L. 480 sales. Dollar exports, however, can
command some premium in return for reputation of quality and service. In a
domestic market some buyers are price buyers; others are looking for qual ity
and service. The market to brewers, which consists mainly of broken rice
delivered In bulk, is a low return one made up mainly of price buyers.
The further processor market, which is the bulk industrial market is
not totally made up of price buyers. Some of these buyers are looking for
service, quality, and guaranteed value. Some forward sales can be made to
this market. Mills like to get into this market because it sets a guar
anteed volume base for mill operations.
The package business, in the domestic market, is one area where premiums
can be obtained, but only in those markets which have been built around a
particular brand. Experience of present mills indicates, however, that it
takes a long time, a lot of investment, and much effort to establish this kind
of market. Examples are Arkansas Rice's labels in Memphis and Chicago.
19 Table 8
Percentage and Per Capita DistributIon of Milled Rice In the United States, by Region, Selected Years 1956-66
Region 1961-62 1966-671956-57 1956-67 pound per l:t, of U. S. pound per :t of U.S.l:t of U. S. pound per to 1966
total tota Icapita capita total capt ta 67 Change Pct. Lbs.
Middle Atlantic 21.1 22.5 6.8 +19 +1.119.6 6.35.7
Pacific 8.0 11.817.5 8.8 +10 +0.823.5 19.6
West South Central 20.4 11.0 18.6 18. 111.9 10.7 - 3 -0.3
South Atlantic 20.2 18.2 18.07.2 7.6 - 4 -0.36.9
East North Central 8.4 2.69.4 8.6 2.42.3 + 4 +0.1
East South Central 5. 1 4.43.8 5.4 0 03.85.9
West North Central 2.6 2.4 +53 +0.81.5 3.21.7 2.3
Mountain 1.4 2.0 4.4 +120 +2.22.31.5 3.0
New England 2.0 2.0 2.6 2.6 +30 +0.62.3 1.9
Region 1956-57 to 1966-67 change Popu Iat ion
1957 I 1967 Source of Change
Per Cap. RatelPop. Chg.ITotal Lbs. Pct. - - mi 11 ion pounds - - -
New England +0.6 + 30 10.0 11.4 12 8 20
Middle Atlantic +1.1 + 19 33.4 37.0 29 29 58
East North Centra 1 +0. 1 + 4 35. I 39.4 -11 47 36
West North Central +0.8 + 53 15.2 16. 1 - 4 7 3
South At 1ant i c -0.3 - 4 24.8 29.6 3 11 8 East Sou th Cent ra 1 0 0 11.8 12.9 0 4 4
West South Cent ra I +0.8 + 53 16.4 19.2 15 4 19
Mountain +2.2 +120 6.4 8. 1 20 3 23
Pacific +0.8 + 10 18.8 25.6 16 1.3 29
Source: U.S.D.A., ERS-408, Distribution of Rice in the U.S., April 1969.
37
at this point. The seasonal price pool concept, discussed earlier, was
started in 1944. Its advantage from a marketing point of view is that it
discourages producers from holding rice back. Since the producer must pay
the same storage cost for rice, whether he delivers it at harvest time or
later, he does not gain any advantage by delivering it at a later date.
Arkansas Rice Growers pay all the freight from the local dryers to the mill
at Stuttgart. In this way, no advantage is gained by the grower who is
closer to the mIll. This aids the Arkansas Rice Growers Cooperative In
currently handling about 55 percent of the rice production in Arkansas.
Although there have always been a number of independent, privately
owned mills in the Arkansas rice industry, these are decreasing in number
as the smaller, older mills cease operating. It appears that in the
future Arkansas Rice Growers and one other cooperative, Producers Rice
Cooperative Association, along with one independent mill may be the only ones
remaining. Part of the rice is sold out of Arkansas to Texas rice mills
during some years. Pricing and marketing of rough rice are not problems for
members of the Arkansas Rice Growers Association, since it is a highly inte
grated cooperative organization. The main output of the Stuttgart plant is
milled rice and by-products. The Association's problem is, therefore, that
of marketing milled rice. It is of key interest to note their accomplish
ments in this respect, because, if Texas producers are to keep in a competi
tive position, actions of Arkansas and other areas must be kept in mind.
About two-thirds of all Southern States' rice production is exported
and one-third goes to the domestic market. Of the amount exported, roughly
50 percent goes to dollar markets, and 50 percent through the P. L. 480
21
Consumption - by Product Type
In addition to significant regional differences in the domestic rice
market are those concerning the type of rice product moving to market.
The three major markets for mill sales are (1) direct food use, (2) for
further processed foods and (3) for brewers. The leading volume goes
into direct food use, but of increasing importance is the processed food
market, Table 9. The processed food market showed a 30 percent gain from
1961 to 1967, consuming 0.7 mill ion cwt. more rice than five years previously.
Other markets had very minor gains; in fact, direct food use declined
slightly.
Processed food uses include those in breakfast cereals, prepared dinners
and the new pre-cooked and flavored rices. Comparative figures are available
regarding the composition of the processed food market, Table 10. Use in
breakfast cereals nearly doubled from 1956 to 1966-67.
According to reports received, in the course of field research, it is
estimated that 60 percent of the domestic market is now regular rices, 25
percent are pre-cooked or instant rices, and 15 percent are flavored rices,
Table 11.
Reflected in the growth of instant and flavored rices is the expanding
demand by housewives for convenience foods, and built-in menu variety, for
meals.
Concomitant with the rise in markets for instant and flavored rices
has been the importance of parboiled rice sales. This form of rice represents
about 15 percent of total mill shipments, Table 12. It too, like the flavored
and instant rices, is one of the more profitable forms from the mill
.~
35
membership are also in Arkansas Grain. Problems exist in maintaining
membership records for a cooperative association of this size. All of
the records concerning stock and equity for each member must be kept
separately, which apparently poses a large administrative problem.
Arkansas Rice Growers owns its own IBM equipment to facilitate record
keeping, and has done so since the early years of computers.
Arkansas Rice Growers Association is presently made up of twenty
separate cooperative entities. Eighteen of these are local dryer and
storage operations. Membership relations direction is the responsibil ity
of one person in the central office. Management of Arkansas Rice Growers
Cooperative is aware that membership relations are very important and a
continuing management problem. They are also aware of the fact that the
problem is never completely solved. local dryer cooperative managers
and two central office field men serve as the main contact with the member
ship. Stressed is the importance of keeping these managers and field men
completely informed of operations and policies at the management level.
In addition, Joint meetings are held with all the boards of directors of
local cooperatives and the two parent cooperatives each year. In addition,
each of the locals hold annual membership meetings during August. Good
attendance occurs at these sessions, which are usually held in conjunction
with dinners or barbecues, with wives also invited.
A small newsletter is published for the use of the organization leaders.
It is sent to members of the parent, and local association, boards of directors,
local banks, and production credit associations. It does not go directly
to members themselves. The expense of these annual meetings is felt to be
23
Table 10
Manufacturing Uses of Rice, United States
Selected Years 1956-66
Year Cerea 1 Soup Canned Rice Other and Baby Food
Percent of otal
Beer Total
'.000 cwt. %
1956-57 28.9 1.6 4.4 l.1 64.0 4,337 100
1961-62 37.9 2.2 1.6 1.5 56.8 5,253 100
1966-67 41.0 1.8 3.7 2.0 51.5 6, l09 100
Source: Distribution Patterns of Rice in the United States, Economic Research Service, U.S.D.A., ERS-408.
Table 11
Estimated Market Share by Type of Rice United States, 1970
Type
Regular
Market Share (percent)
60
Instant 25
Fl avored rices 15
Source: Survey data.
33
MARKETING PROGRAMS - ARKANSAS AND CALIFORNIA
The preceding information regarding production, distribution, and
consumption of rice are important factors to be considered in formulating
a rice marketing strategy for Texas rice producers and associated Louisiana
members. The distrIbution and consumption patterns, however, reflect the
nature and intensity of marketing programs for rice by individual mills,
brokers, the American Rice Council and governmental trade programs. Therefore,
it is important to consider the approach, or philosophy, being pursued in
Texas, Arkansas, and California. To determine these, visits were made with
industry representatives in each state.
The Arkansas Rice Growers
The Arkansas Rice Growers original organization began in 1920 with
rough rice grower contracts and the use of a system of toll milling. The
milling was conducted by a local mill on a toll charge basis. This lasted
for about two years during which time there was reportedly much loss of
rice through poor administrated marketing, which naturally generated bad
feelings among members. After two years of operation in this manner, the
association began to lease facil ities and operate the mill themselves;
however, lack of confidence in management continued. Financing was estab
lished through drawing on local growers and through the Bank for Cooperatives
in St. Louis. It does not appear that a bargaining committee, as such, was
ever part of this organization.
In 1929, Arkansas Rice Growers milled only about 178,000 barrels of
rice apparently the low point in the status of the organization. At this
25
marketing standpoint. As will be noted later, parboiling is a more
important product for Texas rice than in other rice producing areas.
About 50 percent of the rice distributed by mills and repackers during
the 1966-67 crop year was in packages less than 5-pounds in size, Table 13.
However, the proportion in large containers or bulk has been increasing.
The gain was from a level of 39 percent of shipments in 1956-57 to 46 per
cent in 1966-67. This probably reflects the growing market for further
processed rice and flavored rices. These products are primarily prepared
by food manufacturing or marketing firms and not by the rice mills. A
detailed breakdown of markets by the individual states and regions may
be found in Appendix II of this report.
Rice Supply
By Area
The supply of rice to serve U. S. domestic and export markets has
increased from an average of 50 million cwt. in 1959 and 1960 to about
95 million cwt. in 1968 and 1969. Texas has continued to provide about
one-fourth of the production throughout the decade, Table 14. Other
major producing states (Arkansas, Louisiana, and California) have also
supplied approximately one-fourth each. Reflected, therein, is an
acreage control program that has held market shares about equal over
the past ten years. Acreage and production by Texas counties is
presented in Appendix II.
31
Table 16
Shipments of Rice, by Type, from Southern Mills
Type of Rice 1967 1968 196~
Mill. Mill. Mi 11.
Cwt. % Cwt. % Cwt. %
t
Brown Rice
Domestic 85 85 22
Export 4Z030:2/ 6z682 3z059
4,11l.: 8.3 6,767 14.0 3,081 11. 1
Parboi led Brown Rice
Domestic 7 32 24
Export 12505 12608 781
1 ,512 3.0 1, 640 3.4 '805 2.9 ~
Parboiled Mi lIed Rice
Domestic 1,870 1,549 982
Export 32446 3z777 1 ,964
5,316 10.7 5,326 11. 1 2,946 10.7
Regular Milled Rice
Domestic 14,419 16,706 11,109
Export 24 z457 17,761 9 2695
38,876 78.0 34,46] 71.5 20, 80 5 75.3
All Shipments
Domestic 16,381 18,372 12,138
Export 33 z437 29 2828 15,499
49,818 100 48,200 100 27,637 100
lIAugust-March only.
2/- Totals may not agree due to rounding of figures.
Source: Rice Millers Association, reported data.
) )
Table 14
Rice Production in Texas, louisiana, Arkansas, and California, 1959-69
Texas Louisiana Arkansas Ca 1i forn i aYear U. S.Share of Share of Share of Share ofProduction Product ion Production Product ion TotalU. S. Total U. S. Total U. S. Total U. S. Total 000 ewt. % 000 cwt. % 000 ewt. % 000 ewt. % 000 cwt.
1959 13,136 27.9 12,910 27.4 13 ,022 27.7 11,730 24.9 47,015
1960 12,823 24. 1 13,053 24.6 13,536 25.5 13,752 25.9 53, 122
1961 11,861 21.9 13,396 24.7 13,440 24.8 13,920 25.7 54, 198
1962 15,801 23.9 15,494 23.4 15,930 24.1 l5,988 24.2 66,045
1963 16,946 24. 1 16,510 23.5 17,302 24.6 14,013 19.9 70,269
1964 19,713 269 16,929 23. I 18,490 25.3 16,514 22.6 73,142
1965 21,252 27.8 18,282 23.9 18,662 24.5 16,023 21.0 76,281
1966 21,210 24.9 20,905 24.6 20,511 24. 1 19,800 23.3 85,020
1967 25,908 28.9 22,035 24.6 21 ,465 24.0 17,640 19.7 89,379
1968 27, 164 25.8 26,142 24.8 24,596 23.3 23,328 22. I 105,322
1969 21,646 23.7 20,774 22.7 24,720 27. 1 21,395 23.4 91 ,303
Source: Annual Rice Market Summary, for appropriate years, USDA - C & MS. N ........
29
Tab Ie 15
Market Allocation of Texas and Total
Market Outlet
Domestic Market P ri vate trade Government
Puerto Rico
Exports ~ Do lIar Ma rkets
P. L. 480
TOTAL
Texas
Thous. cwt. :(
5, 147 32 101 1
2140
6,289 40 4,263 27
15,840 100
I968-69!!
Southern States Except Texas Thous. cwt. :(
11,667 36 859 3
557
8,287 26 10,989 34
32,359 100
Southern States Rice
A II Southe rn States
Thous. cwt. :(
16,814 35 960 2
597
14,576 30 15,252 32
48,199 100
II-August-July marketing year
2/Less than one percent.
Source: The Rice Millers Association, Statistical Reports.
29
Table 15
Market Allocation of Texas and Total
1968-6911
Southern StatesTexasMarket Out let Except Texas Thous. cwt. % Thous. cwt. ~
Domestic Market II ,667 365,147 32
101 I
Private trade
859 3
2/
Government
40 557
Exports
Puerto Rico
~. 6,289 40 8,287 26Dollar Markets 4,263 27 10,989 34
TOTAL
P. L. 480
15,840 lOa 32,359 100
Southern States Rice
All Southern States
Thous. cwt. %
16,814 35
960 2
597
14.576 30
15,252 32
48,199 lOa
lIAugust-July marketing year
2/Less than one percent.
Source: The RIce Millers Association, Statistical Reports.
) )
Table 14
Rice Production in Texas, Louisiana, Arkansas, and California, 1959-69
Texas Louisiana Arkansas Cal i forniaYear U. S.Share of Share of Share of Share ofProduction Production Production Production TotalU. S. Total U. S. Total U. S. Total U. S. Total 000 cwt. % 000 ewt. % 000 ewt. % 000 cwt. % 000 ewt.
1959 13,136 27.9 12,910 27.4 13,022 27.7 11,730 24.9 47,015
1960 12,823 24.1 13,053 24.6 13,536 25.5 13,752 259 53, 122
1961 11,861 21.9 13,396 24.7 13,440 24.8 13,920 25.7 54, 198
1962 15,801 23.9 15,494 23.4 15,930 24. 1 15,988 24.2 66,045
1963 16,946 24. 1 16,510 23.5 17,302 24.6 14,013 19.9 70,269
1964 19,713 26.9 16,929 23.1 18,490 25.3 16,514 22.6 73,142
1965 21,252 27.8 18,282 23.9 18,662 24.5 16,023 21.0 76,281
1966 21,210 24.9 20,905 24.6 20,511 24. 1 19,800 23.3 85,020
1967 25,908 28.9 22,035 24.6 21 ,465 24.0 17,640 19.7 89,379
1968 27, 164 25.8 26,142 24.8 24,596 23.3 23,328 22.1 105,322
1969 21,646 23.7 20,774 22.7 24,720 27.1 21,395 23.4 91 ,303
Source: Annual Rice Market Summary, for appropriate years, USDA - C & MS. N ""'-I
31
Table 16
Shipments of Rice, by Type, from Southern Mills
Type of Rice 1967 1968 196~
Mi 11. Mill. Mi 11.
Cwt. % Cwt. % Cwt. %
t
Brown Rice
Domestic 85 85 22
Export 420302/ 6,682 3,059 4, l11f!:.: 8.3 6,767 14.0 3,081 11.1
Parboi led Brown Rice
Domestic 7 32 24
Export 11505 11608 781
1 ,512 3.0 1,640 3.4 ~ 2.9 ,--..
Parboiled Milled Rice
Domestic 1,870 1,549 982
Export 32446 3,777 1 ,964
5,316 10.7 5,326 11. 1 2,946 10.7
Regular Mi lied Rice
Domestic 14,419 16,706 11 , 109
Export 24 z457 17,761 92695
38,876 78.0 34,467 71.5 20,805 75.3
All Shipments
Domestic 16,381 18,372 12,138
Export 33 2437 29 2828 15,499
li9, 81 B 100 48,200 100 27,"637 100
!!August-March only.
2/- Totals may not agree due to rounding of figures.
Source: Rice Millers Association, reported data.
25
marketing standpoint. As will be noted later, parboiling is a more
important product for Texas rice than in other rice producing areas.
About 50 percent of the rice distributed by mills and repackers during
the 1966-67 crop year was in packages less than 5-pounds in size, Table 13.
However, the proportion in large containers or bulk has been increasing.
The gain was from a level of 39 percent of shipments in 1956-57 to 46 per
cent in 1966-67. This probably reflects the growing market for further
processed rice and flavored rices. These products are primarily prepared
by food manufacturing or marketing firms and not by the rice mills. A
detailed breakdown of markets by the individual states and regions may
be found in Appendix II of this report.
Rice Supply
By Area
The supply of rice to serve U. S. domestic and export markets has
increased from an average of 50 million cwt. in 1959 and 1960 to about
95 million cwt. in 1968 and 1969. Texas has continued to provide about
one-fourth of the production throughout the decade. Table 14. Other
major producing states (Arkansas, louisiana, and California) have also
supplied approximately one-fourth each. Reflected, therein, is an
acreage control program that has held market shares about equal over
the past ten years. Acreage and production by Texas counties is
presented in Appendix II.
33
MARKETING PROGRAMS - ARKANSAS AND CALIFORNIA
The preceding information regarding production, distribution, and
consumption of rice are important factors to be considered in formulating
a rice marketing strategy for Texas rice producers and associated Louisiana
members. The distribution and consumption patterns, however, reflect the
nature and intensity of marketing programs for rice by individual mills,
brokers, the American Rice Council and governmental trade programs. Therefore,
it is important to consider the approach, or philosophy, being pursued in
Texas, Arkansas, and Cal ifornia. To determine these, visits were made with
industry representatives in each state.
The Arkansas Rice Growers
The Arkansas Rice Growers original organization began in 1920 with
rough rice grower contracts and the use of a system of toll milling. The
mill ing was conducted by a local mill on a toll charge basis. This lasted
for about two years during which time there was reportedly much loss of
rice through poor administrated marketing, which naturally generated bad
feelings among members. After two years of operation in this manner, the
association began to lease facilities and operate the mill themselves;
however, lack of confidence in management continued. Financing was estab
lished through drawing on local growers and through the Bank for Cooperatives
in St. Louis. It does not appear that a bargaining committee, as such, was
ever part of this organization.
In 1929, Arkansas Rice Growers milled only about 178,000 barrels of
rice apparently the low point in the status of the organization. At this
23
Table 10
Manufacturing Uses of Rice, United States Selected Years 1956-66
Year Cereal Soup Canned Rice and Baby Food
Other Beer Total
Percent of otal 1 000 cwt. %
1956-57 28.9 1.6 4.4 1.1 64.0 4,337 100
1961-62 37.9 2.2 1.6 1.5 56.8 5,253 100
1966-67 41.0 1.8 3.7 2.0 51.5 6,109 100
Source: Distribution Patterns of Rice in the United States, Economic Research Service, U.S.D.A., ERS-408.
Table 11
Estimated Market Share by Type of Rice United States, 1970
Type
Regular
Market Share (percent)
60
Ins tant 25
Flavored rices 15
Source: Survey data.
35
membership are also in Arkansas Grain. Problems exist in maintaining
membership records for a cooperative association of this size. All of
the records concerning stock and equity for each member must be kept
separately, which apparently poses a large administrative problem.
Arkansas Rice Growers owns its own IBM equipment to facil itate record
keeping, and has done so since the early years of computers.
Arkansas Rice Growers Association is presently made up of twenty
separate cooperative entities. Eighteen of these are local dryer and
storage operations. Membership relations direction is the responsibil ity
of one person in the central office. Management of Arkansas Rice Growers
Cooperative is aware that membership relations are very important and a
continuing management problem. They are also aware of the fact that the
problem is never completely solved. Local dryer cooperative managers
and two central office field men serve as the main contact with the member
ship. Stressed is the importance of keeping these managers and field men
completely informed of operations and policies at the management level.
In addition, joint meetings are held with all the boards of directors of
local cooperatives and the two parent cooperatives each year. In addition,
each of the locals hold annual membership meetings during August. Good
attendance occurs at these sessions, which are usually held in conjunction
with dinners or barbecues, with wives also invited.
A small newsletter is published for the use of the organization leaders.
It is sent to members of the parent, and local association, boards of directors,
local banks, and production credit associations. It does not go directly
to members themselves. The expense of these annual meetings is felt to be
21
Consumption - by Product Type
In addition to significant regional differences in the domestic rice
market are those concerning the type of rice product moving to market.
The three major markets for mill sales are (1) direct food use, (2) for
further processed foods and (3) for brewers. The leading volume goes
into direct food use, but of increasing importance is the processed food
market, Table 9. The processed food market showed a 30 percent gain from
1961 to 1967, consuming 0.7 mill ion cwt. more rice than five years previously.
Other markets had very minor gains; in fact, direct food use declined
slightly.
Processed food uses include those in breakfast cereals, prepared dinners
and the new pre-cooked and flavored rices. Comparative figures are available
regarding the composition of the processed food market, Table 10. Use in
breakfast cereals nearly doubled from 1956 to 1966-67.
According to reports received, in the course of field research, it is
estimated that 60 percent of the domestic market is now regular rices, 25
percent are pre-cooked or instant rices, and 15 percent are flavored rices,
Table 11.
Reflected in the growth of instant and flavored rices is the expanding
demand by housewives for convenience foods, and built-in menu variety, for
meals.
Concomitant with the rise in markets for instant and flavored rices
has been the importance of parboiled rice sales. This form of rice represents
about 15 percent of total mill shipments, Table 12. It too, like the flavored
and instant rices, is one of the more profitable forms from the mill
.~
37
at this point. The seasonal price pool concept, discussed earlier, was
started in 1944. Its advantage from a marketing point of view is that it
discourages producers from holding rice back. Since the producer must pay
the same storage cost for rice, whether he delivers it at harvest time or
later, he does not gain any advantage by delivering it at a later date.
Arkansas Rice Growers pay all the freight from the local dryers to the mill
at Stuttgart. In this way, no advantage is gained by the grower who is
closer to the mill. This aids the Arkansas Rice Growers Cooperative in
currently handling about 55 percent of the rice production In Arkansas.
Although there have always been a number of independent, privately
owned mills in the Arkansas rice Industry, these are decreasing in number
as the smaller, older mills cease operating. It appears that in the
future Arkansas Rice Growers and one other cooperative, Producers Rice
Cooperative Association, along with one independent mill may be the only ones
remaining. Part of the rice is sold out of Arkansas to Texas rice mills
during some years. Pricing and marketing of rough rice are not problems for
members of the Arkansas Rice Growers Association, since it is a highly inte
grated cooperative organization. The main output of the Stuttgart plant is
milled rice and by-products. The Associations problem is, therefore, that
of marketing milled rice. It is of key interest to note their accomplish
ments in this respect, because, if Texas producers are to keep in a competi
tive position, actions of Arkansas and other areas must be kept in mind.
About two-thirds of all Southern States rice production is exported
and one-third goes to the domestic market. Of the amount exported, roughly
50 percent goes to dollar markets, and 50 percent through the P. L. 480
19
Table 8
Percentage and Per Capita Distribution of Milled Rice In the United States, by Region, Selected Years 1956-66
Region 1956-57 1961-62 1966-67 1956-67 to 196667 Change
1% of U.S. total
pound per capita
I%.of U.S. tota 1
pound per capita
1% of U.S. total
pound per capita
Middle Atlantic
Pacific
West South Centra 1
South Atlantic
East North Centra 1
East South Central
West North Cen tra 1
Mountain
New England
21.1
17 .5
20.4
20.2
9.4
5.1
2.6
1.4
2.3
5.7
8.0
11.0
7.2
2.3
3.8
1.5
2.0
2.0
19.6
23.5
18.6
18.2
8.4
5.9
2.4
1.5
1.9
6.3
11 .8
11.9
7.6
2.6
5.4
1.7
2.3
2.0
22.5
19.6
18. 1
18.0
8.6
4.4
3.2
3.0
2.6
6.8
8.8
10.7
6.9
2.4
3.8
2.3
4.4
2.6
Pct. Lbs. +19 +1.1
+10 +0.8
- 3 -0.3
- 4 -0.3
+ 4 +0.1
0 0
+53 +0.8
+120 +2.2
+30 +0.6
Region 1956-57 to 1966-67 change PopUlation
1957 I 1967 Source oT Change
Per Cap. Rate IPop. Chg.1 Tota 1 Lbs. Pct. - - mill ion pounds - - - -
New England +0.6 + 30 10.0 11.4 12 8 20
Middle Atlantic +1.1 + 19 33.4 37.0 29 29 58
East North Central +0.1 + 4 35.1 39.4 -11 47 36
West North Central +0.8 + 53 15.2 16. 1 - 4 7 3
South Atlantic -0.3 - 4 24.8 29.6 3 11 8 East South Central 0 0 11.8 12.9 0 4 4
West South Central +0.8 + 53 16.4 19.2 15 4 19
Mountain +2.2 +120 6.4 8.1 20 3 23
Pacific +0.8 + 10 18.8 25.6 16 1.3 29
Source: U.S.D.A., ERS-408, Distribution of Rice in the U.S., April 1969.
39
The domestic market sales by Arkansas Rice Growers assumes the following
division.
Domes tic Market Share
Own brand label sales Private label Bulk to further processors
Major Minor Moderate
The trends appear to be, first, toward more sales of their own brand,
and secondly, those to national food concerns engaged in further processing
of national brand breakfast cereals, and finally, least increase is in the
private label area. It is felt that no organization can really gain anything,
in the long run, through P. L. 480 sales. Dollar exports, however, can
command some premium in return for reputation of quality and service. In a
domestic market some buyers are price buyers; others are looking for quality
and service. The market to brewers, which consists mainly of broken rice
delivered in bulk, is a low return one made up mainly of price buyers.
The further processor market, which is the bulk industrial market is
not totally made up of price buyers. Some of these buyers are looking for
service, quality, and guaranteed value. Some forward sales can be made to
this market. Mills like to get into this market because it sets a guar
anteed volume base for mill operations.
The package business, in the domestic market, is one area where premiums
can be obtained, but only in those markets which have been built around a
particular brand. Experience of present mills indicates, however, that it
takes a long time, a lot of investment, and much effort to establish this kind
of market. Examples are Arkansas Rice's labels in Memphis and Chicago.
17
a pound per capita may be maintained. Future expansion depends heavily on
the specialty rices which are assuming an increasing share of the market.
It will also depend on a continuing flow of new rice products and their
acceptance by the consumer.
Based upon per capita consumption trends in the domestic market
during the past 15 years, projections were made to 1975 and 1980. Results
of the analysis produced the equation Y = 5.0 + .206 X (base 1955), where
Y = estimated consumption, and X = number years beyond 1955. It indicates
that consumption will reach 9.1 pounds per person in 1975 and almost 10.2
pounds by 1980. Domestic market civilian consumption of rice is now
approximately 17 million cwt. per year, compared to 11 million cwt. ten
years ago. Indications are that we can expect the 20 million cwt. level
to be reached by 1975, if not sooner, and possibly 25 million by 1980.
Included in these estimates are projected gains in population as well as
per capita use rates.
Domestic Market - By Regions
Although milled rice for direct domestic consumption is shipped into
all 50 states, distribution, both total and per capita, varies considerably
among states and by region. Shipments converted to a per person basis vary
from an annual average of 100 pounds per capita in Hawaii to less than one
pound in Wyoming. Besides Hawaii, other states with above-average rice
receipts per capita are Lousiana, South Carolina, Alaska, Arkansas, Texas,
Mississippi, Alabama, and New Jersey. On a regional basis, the Pacific,
Middle and South A~lantic, and West South Central regions are the major
41
matter to all eighteen local association boards, to obtain a general reaction
to the proposals.
The above is not to say that management has no bounds. Obviously, if
the net results of the programs espoused is not a final benefit to members,
membership will decrease. Producers, in other words, expect good results
In the annual and long-run perspective. It is up to management to produc
them, or else management would likely be replaced.
The Producers Cooperative
Another segment of the Arkansas marketing activity is under the direction
of the Producers Cooperative Association. Also headquartered at Stuttgart,
Arkansas, It operates almost solely within the Stuttgart vicinity. Such
geographic restriction reflects the fact that it only operates one dryer,
that being in Stuttgart. This is in sharp contrast to the eighteen dryers
ov~r the rice growing areas of the state which are a part of the Arkansas
Rice Growers Association.
Management of the Producers Association has many similarities, in
principle, to that of Arkansas Rice Growers. Most policy decision alterna
tives are worked out by management, presented to, and approved by, the board
of directors. Evidence of this is especially obvious now. The former general
manager of the association has recently retired. Prior management pol icy was
keys toned to keeping operations small geographically, but being large within
that particular territory. That policy was successfully achieved.
The new management has changed policy to one of expansion, development
of new dryers, and more direct state wide competition with the larger Arkansas
15
Sales of U. S. rice to European markets have made favorable gains as a
result of concerted marketing efforts by mills, their brokers, U. S. government
market development effort, and that of the American Rice Council. Hard dollar
sales in this market averaged nearly 5.1 million cwt. per year for three
marketing years 1966-67 through 1968-69, or 59 percent more than the 3.2
mil lion cwt. average for 1959-60 through 1961-62 seasons. Without increased
effort in the European market, gains may come more slowly for the 1975
planning horizon. It is a market where obviously every effort at sales
building should be continued.
Domestic Market Total
The domestic market for rice is the most stable sales outlet. As
may be noted from Table 5, the quantity sold in the domestic market rose
rather steadily from 10.8 million cwt. in 1959 to 16.5 million cwt. in 1968.
In the last several years, the domestic market has taken about 30 percent
of total U. S. production. The American Rice Council has been very active
in rice promotion in the United States market.
The per capita consumption of rice in the U. S. increased to a level
of about 8.3 pounds per year, compared to about 6.0 pounds ten years ago-
a 33 percent gain, Table 7. This upward per capita trend contributed most
of the growth in total domestic rice consumption rather than gains in total
U. S. population. In fact, in recent years increased per capita consumption
has accounted for about two-thirds of the total national increase in rice
usage. The other third came from an increase in population.
What the future holds for rice consumption is a matter of conjecture.
Quite possibly the current trend of an average annual gain of two-tenths of
43
The California Rice Cooperatives
Two cooperatives in California market, between them, about 80 percent
of that state's production. The Farmers Rice Cooperative, in 1970, had about
850 producer members and the Rice Growers Association of California reported
approximately 1,770. The Farmers Cooperative processes about 5 million
cwt. of rice per year compared with the Rice Growers Association of California
output of around 13 million cwt.
The Farmers Cooperative is now in its twenty-sixth year of operation.
Two primary reasons were given for organizing this cooperative. One was
the belief among some producers that a single cooperative in California
was not enough. Secondly, it was felt that the then dominant independent
rice handler in California was not treating producers fairly, and Instead
was giving rice producers whatever minimum price it felt producers would
take.
Farmers Rice Cooperative Association started in 1944 with only 33
farmers and milled 300,000 barrels of rice. Leadership in forming the
associati