World Market Price factors were again left unchanged by USDA this week. The on-farm value of long grain rough holds at $11.74 per cwt.
After retracing all of the previous week’s downward action and then even making a new near term high at 15.885, prices backed off, fell into fairly strong support, tried to rally again, and then slipped to settle at the 15.635 level per the continuation chart on Friday.
Trading during the week saw continued rolling from the March into the May, with some May/July spreading also being a feature. It’s difficult to predict, but next week may bring more selling that will likely push prices into the 15.30 region, at which time we think trade buying will come in and take prices back up for at least one more push toward the 16.00 level.
Open interest has dropped to around 7,550 contracts as of Thursday’s close, but that should pick up when buyers return to the pit. The May/July/September/November pricing continues to be inverted, and this is positive to the nearby market. New crop prices are low, now at 14.035 for Sep and 13.89 for Sep.
We continue to recommend using caution, good judgment, and good money management if trading rice or any other futures contracts.
Export sales were back this week with a big 93,200 tons of net registrations. By far the vast majority were in the long grain columns, with a total of 25,300 tons of rough being sold to Mexico, and unknown destination, and Costa Rica.
Milled and brown long grain totaled 64,700 ton, where the big hitter was Iraq for 60,000 tons, followed by Switzerland for 1,500 tons, Dominican Republic for 900 tons, Canada for 600 tons (including 100 tons of brown), and Saudi Arabia for 500 tons (parboiled).
Medium/short postings were very light for the week, with a total of 4,600 tons of milled and brown being shared by Japan, Jordan, and Canada. We will see more swings in total sales as this year progresses and more difficulty is experienced in getting rough of all types for the export markets.
Exports for the week were a solid 75,800 tons, and included 6,400 tons to Mexico, 6,300 tons to Honduras, and 6,000 tons to Costa Rica – all long grain rough.
On the milled and brown side of long grain, 13,600 tons total were shipped to Haiti (9,500 tons), Mexico (1,600 tons), and Canada (1,000 tons of milled plus 300 tons of brown).
Medium/short grain shipped out 23,800 tons of rough to Turkey. Medium/short milled loaded out 19,800 tons, including 12,000 tons to Japan, 2,700 tons to Jordan, 1,600 tons to Turkey, and 900 tons to Canada.
Texas and Louisiana
There were no public sales and no bids that we know of in Texas this week. We did hear a report of some small trading at $9.30 per cwt premium over loan, but with something around only 20% of the rice left in first hands, Texas growers want premiums in the $9.50 to $9.25 per cwt range or higher.
The mills seem to be a little ahead at present, but there is probably a good bit of buying yet to be done to finish this milling year. On top of that, supplies won’t be any larger next year and may actually be a bit smaller in long grain supplies, as some acres have already been committed to medium grain.
Planting is not far off now, but there is little conversation about it. Water problems and trying to understand just what the new farm bill means are two items of concern at present. Colorado River water will be restricted again, just as it has been for the last two years. And now the Brazos River situation is getting critical as well, as being reported by folks who have grown rice non-stop for several decades who may not be able to plant this year.
Hopefully this drought will cycle out of Texas in the very near future and allow the rains to return. The good news is that the east side seems to have enough water at present to plant and cut a first and second crop in the coming year. And this extends over the Sabine River into south Louisiana, where planting will start sometime next week – after the Mardi Gras activities settle down.
South Louisiana old crop long grain still in first hands is almost gone now, with something probably well under 10% still being held for higher prices. We are told that long grain paddy offered still gets $25.00 per bbl fob farm; there is no medium grain left to sell.
There will be no change in the amount of land committed to rice this year, and a large percentage of those new crop acres are already contracted for medium grain at the $25.00 per bbl fob farm level. Long grain prices, however, are not attractive to growers at the $22.00 to $21.25 per bbl fob farm price (conventional to hybrid).
Nothing has been booked at those levels that we can find, and we are told that it will take at least $24.00 per bbl to cover costs in the coming year. We can’t dispute this claim, particularly with all the risk now being squarely on the farmers’ shoulders.
The Delta – Mississippi/Arkansas/Missouri
Mississippi reports buying continuing at the $16.10 to $16.25 per cwt levels delivered mill. Bidding had picked up slightly for delivery to barge loading points, but we understand that it has now dropped back to the $15.56 per cwt level.
Growers here are trying to figure just what the farm bill means in terms of protection against low prices, and many have decided to plant soybeans instead. The feeling persists that around 75,000 acres that were prevented planting last year will return with the new crop to make a total of close to 200,000 acres of rice.
Early bidding at 75 cents under the Sep futures is not getting any action at present.
Activity in Arkansas is called slow to quiet, with some old crop bidding still being seen at $6.95 bu fob farm. A good many growers are said to be holding their crop until prices in the area of $7.25 bu at the farm are seen.
It looks like the domestic side of the market is not yet covered for the entire year, so the next few months could bring some interesting action. We are hearing questions being raised about next year’s rice acres, with some saying that bankers are not happy with what they see on the long grain rice price horizon.
This could get tricky, as we could well be looking at a year where the rubber finally hits the road and the real costs of growing hit the farmer head-on. Without enough support from the farm bill, low prices could be a very dangerous and costly variable for farmers, and we are told that the $6.00 bu number being talked about is far from high enough.
Something more like $6.40 bu for long grain and maybe $6.75 bu for medium grain is more likely to cover the risks and costs. With this in mind, we will have to wait and see just how many acres come back to rice in the new crop. the recent strength in soybeans along with what has been a positive basis will have an effect, too.
Missouri reports continued old crop long grain bidding as high as $7.00 bu delivered to barge facilities, with new crop being noted at $6.15 bu delivered – not sure how much is being booked for next year at that low level.
Even with the continuing problems in Thailand and the persistent reports of sales being made by the government there, Asian prices have remained fairly steady over the past week. Thai 100% Grade B finished the week quoted at $400 per ton for old crop and $445 per ton for new crop fob vessel; Thai parboiled was holding at $465 per ton.
Viet 5% long grain milled was called $400 per ton. Pakistan’s 5% milled was noted at $400 per ton, with parboiled at $410 per ton. India’s prices are fairly strong at $419 per ton for 5% milled and $405 per ton for parboiled.