USDA’s World Market Price factors remained undisturbed again this week. The on-farm value of long grain rough remains at $11.63 per cwt.
The monthly Supply/Demand Report was released by USDA this morning, and the projections across the entire grain and cotton complex were bearish.
Rice was not left out of the negative reports, but we think some adjustments are warranted to this morning’s figures. It should be considered that none of us will really have a good feel for next year’s crop until the harvest gives us some yield and quality feedback on the supply side of the ledger and export buyers give us some feedback on the demand side.
In the meantime, however, we continue to see the use of domestic and residual figures as a tool for wide changes in Supply/Demand numbers as incorrect. That figure should change, once an accurate level is determined, by very little, and any change should be slightly higher according to some industry sentiments. If we assume that to be correct and we accept that next year’s long grain domestic figure is 12 million cwts higher than this year’s, then the argument can be made that this year is under estimated by 10 to 12 million cwts. That would drop this year’s carry over drastically to the single digit level we have been suggesting for some time now, and that, in turn, would drop next year’s ending stocks number by similar amounts.
We are not convinced that an accurate number will ever be confirmed, but we do believe that this year’s consumption has taken old crop long grain stocks to very thin levels. As far as today’s report is concerned, USDA projected and increase in long grain total supply by 7.5 million cwts and raised total use (including domestic) by 5 million cwts, netting a 2.5 million increase (from last month) in next year’s ending long grain stocks to 28.8 million cwts.
The Avg. Farm Price projection was lowered by 80 cents on both ends to $12.00 to $13.00 per cwt. Medium/short grain saw something similar, with total supply being raised by 5 million cwts against an offsetting total use increase by 5 million cwts – leaving the ending medium/short grain stocks unchanged from last month at 8.7 million cwts. Avg. Farm Price projections for medium/short grain were sharply decreased from $18.20 to $19.20 last month to $17.00 to $18.00 per cwt. We know that there will be more US rice this year, but we think the supply figures are too high, and the prices perhaps too low as well – the market will let us know on both of these counts as the new crop/marketing year gets underway.
There were no fireworks in the July contract as some had thought there might be with the contract getting ready to expire. Compared to the spot action of most positions, a fairly large open interest remained active and still seems to be holding for delivery next week at expiration. But the July, which settled today at 14.50, down 10 cents on the day, is no longer having any noticeable effect on the new crop months.
New crop Sep fell 25 cents to settle at 13.205 after today’s negative Supply/Demand figures were released. We had thought the 13.40 level would hold, but the rice figures were too negative along with the drop in grain prices to hold up. Of interest on all the Supply/Demand reports, there were no limit down moves or anything even close to limit down. Rice is trying to find a support level, and that may be in the 13.05 area – next week may give us a better picture. It’s difficult for us to see futures drop much further, but until the cash is available at harvest, the market is probably going to be riskier than usual.
Fundamentals are anybody’s guess right now. Continuation chart pattern do show a gap substantially above the current level, and gaps tend to be filled, sooner than later. It would take some fairly stout fundamental news to close the rice gap just now, but the new crop year is not even underway yet. We continue to strongly recommend using care, good judgment, and calm decision making if trading rice or any other futures contracts. In other markets the Dow was at 16934.08, the Euro was at 1.3612 against the Dollar, and nearby crude oil futures were at 100.76 per bbl. Grains settled today with September corn at 3.78-1/4, August soybeans at 11.95-3/4, September wheat at 5.26, and December cotton at 68.12.
Total net export postings for the past two weeks came in at 104,100 tons, a very good amount, especially for this time of year. Long grain was the big hitter in the total numbers, starting with 41,800 tons of rough sold to Mexico, Guatemala, Honduras, and El Salvador. There were also 1,000 tons of long grain rough sold to an unknown buyer for 2014/15 crop delivery. Long grain milled sales included Haiti for 25,100 tons, Ivory Coast for 10,400 tons, Saudi Arabia for 1,300 tons (parboiled), Canada 1,300 tons, and Mexico 900 tons. Medium/short grain milled sales posted 12,000 tons to Japan, 2,000 tons to Jordan, 800 tons old crop plus 100 tons new crop to the United Arab Emirates, and 1,600 tons to Canada.
Export shipments for the two week time frame came in at 85,200 tons. Long grain rough accounted for 42,300 tons, with shipments going to Mexico (25,500 tons), Guatemala (8,200 tons), Costa Rica (5,000 tons), and El Salvador (3,600 tons). Long grain milled and brown moved 18,200 tons, with the largest consignments going to Haiti (7,400 tons), Mexico (3,600 tons), Canada (2,500 tons milled plus 400 tons brown), and Saudi Arabia (1,100 tons parboiled). There was no medium/short paddy shipped during the last two weeks, but 3,200 tons of brown did move to South Korea. Medium/short milled loadings totaled 21,500 tons, with Japan the big shipper with 13,100 tons, followed by Jordan at 2,100 tons, Saudi Arabia at 2,000 tons, and Canada also at 2,000 tons.
As the week came to a close, Thai 100% Grade B was called $430 per ton fob vessel, with Thai parboiled at $435 per ton. Viet 5% milled was at $425 per ton. Pakistan’s 5% long grain was quoted at $440 per ton, with parboiled at the same $440 per ton price. Indian milled 5% long grain was called $435 per ton, with parboiled at $420 per ton.