Bloomberg News

Texas Rice Farms Look for Miracle as Irrigation Cutoff Looms

February 21, 2012

(Updates with rice closing price in fifth paragraph.)

Feb. 17 (Bloomberg) -- Rains in Texas have failed to refill water reservoirs for the state’s main rice-growing areas, prompting the first-ever restrictions on irrigation that may lead to the smallest planted acreage since the 1920s.

The Lower Colorado River Authority, which manages lakes supplying water to 1.1 million people, including the city of Austin, Texas, plans to stop releasing water for irrigation on March 1, right before the start of planting for this year. The restriction would affect farmers in Colorado, Matagorda and Wharton counties, which produced 62 percent of the Texas rice crop and 3.7 percent of the U.S. harvest in 2009.

While central and eastern Texas received as much as double the normal amount of rain so far this year, that isn’t enough to make up for getting less than half the normal moisture in 2011. Lake Travis and Lake Buchanan, the two main reservoirs providing irrigation for farmers, were about 38 percent full as of yesterday, according to the water district.

“If we get no water, I won’t farm any rice this coming year,” said Mike Burnside, who normally grows rice on 1,000 acres in Bay City, Texas. “We do have crop-insurance protection for prevented planting, which will let us survive the year. But the seed salesman, fertilizer salesman, everybody is suffering under the drought.”

Lower rice output in the U.S., as farmers switch to more profitable corn, and as saltwater erodes soil in Louisiana, may send prices on the Chicago Board of Trade up 11 percent to $16 per 100 pounds by November, the highest since November 2011, Dennis DeLaughter, the owner of Progressive Farm Marketing Inc. in Edna, Texas, said in a telephone interview. Futures for May delivery settled at $14.385 today in Chicago.

Global Supply

Rice futures have dropped 18 percent in the past six months as prospects for rising output in India, China and Indonesia signaled higher global stockpiles. World food prices have fallen 9.9 percent from a record in February 2011, partly because of lower grain costs, United Nations data show.

The UN’s Food & Agriculture Organization said Feb. 1 that prices probably will drop in coming months as global demand for imports weakens, while supplies and reserves expand. Global milled-rice trade may slip 5 percent to 32.8 million metric tons in 2012 from a record 34.5 million in 2011, the UN said.

“We are long-term bullish because rice is the staple food of the world, and there will be problems,” said DeLaughter, who correctly predicted last year’s rally to $18. In the U.S., “some of these mills are going to get really nervous about the supply of rice available to them, with acres declining.”

U.S. Benchmark

Prices in Chicago are used as a benchmark for U.S. millers, who mostly buy domestically grown crops. The U.S. was the world’s fifth-biggest rice exporter in the past year, behind Vietnam, Thailand, India and Pakistan, according to the U.S. Department of Agriculture.

Texas, the fourth-largest U.S. grower last year after Arkansas, California and Louisiana, may plant about 90,000 acres of rice this year, Larry Falconer, an agricultural economist at Texas A&M University in Corpus Christi, said in a telephone interview. That would be the lowest since at least 1929, according to the earliest data available from the USDA.

Rice production, milling and other related industries provided more than 4,000 jobs to Wharton, Colorado and Matagorda counties last year, and contributed about $458.3 million to the local economy, Falconer said. The three counties had a total population of about 98,900 in 2010, according to U.S. Census Bureau data.

Lake Travis and Lake Buchanan held about 767,000 acre feet of water as of yesterday, equal to about 249.9 billion gallons (946 billion liters), according to the water district. Recent rains expanded the lakes by about 4.2 percent from 736,000 acre feet on Dec. 1, the lowest level since 1964, said Clara Tuma, a spokeswoman for the Lower Colorado River Authority in Austin.

Not Enough

Still, irrigation won’t be allowed unless lake levels climb to 850,000 acre feet, and the amount of water farmers would be able to use would be restricted until levels reach 920,000 acre feet, Tuma said. The region had its driest 12-month period on record from October 2010 to September 2011, which resulted in a record-low amount of water flowing into the lakes, Tuma said.

It’s unlikely that storms will bring enough rain by March 1 to boost lake levels enough for farmers to irrigate, said John Nielsen-Gammon, the state climatologist. Texas received 15.05 inches (38 centimeters) on average statewide in 2011, the driest year since 1917, he said. Western, central and southern Texas were the driest on records dating to 1895, he said.

“The problem is, to get significant inflows into the lakes, the soil would have to be moist enough to allow most of the rain to run off,” Nielsen-Gammon said. “It would probably take several inches of rain to do it.”

Digging Wells

Burnside, the Bay City farmer, said some growers are digging wells, hoping to tap into enough ground water to make up for the lost surface-water irrigation, normally pumped by LCRA through canals along the Colorado River. A typical well costing around $250,000 would only be big enough to irrigate about 300 acres, too expensive for most farmers, including him, Burnside said.

“We’ve got another 20 days to see if we can catch some rain,” Burnside said. “Miracles do happen. It’s in God’s hands now. We’ve just got to roll with it and keep on going.”

--Editors: Steve Stroth, Patrick McKiernan

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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