WASDE
Thursday morning USDA did something we thought would never happen. In their monthly supply/demand update, they chopped 11.5 million cwt from the total rice supply. 2014/15 beginning stocks were lowered, and production was slashed 10.5 million cwts basis reduced acreage as well as lower yield.
Some of the individual numbers:
- For the current crop (now being harvested) USDA lowered acreage by 116,000 from last month. California and Arkansas account for the drop, including the loss of 65,000 acres in California. This puts medium grain at 390,000 acres, down 120,000 from last year.
- Average all rice yield was pegged at 7,501 pounds per acre, down 59 pounds from last month. Everyone was down except California.
- This puts long grain production at 158.3 million cwt, off 11.1 million from last month. Medium/short grain production is up 0.6 million at 60.0 million cwts.
- To make the equation balance, USDA cut domestic and export use by 3.0 million and 7.0 million cwts, respectively — all because of smaller supply.
- Ending stocks a year from now were lowered 1.5 million cwt as imports were not changed.
The 2014/15 long-grain season-average farm price range is projected at $12.50 to $13.50 per cwt, up 50 cents per cwt on both ends of the range from last month compared to $15.40 per cwt for 2013/14. The combined medium- and short-grain farm price range is projected at $17.25 to $18.25 per cwt, down 25 cents per cwt on both ends of the range from last month compared to a revised $18.50 per cwt for 2013/14.
We are pleased that USDA has made a giant step towards resolving an issue that has been clouding their balance sheet for the past five years. They are now much closer to the consensus of the trade, and we believe paint a more accurate picture of production and supply.
This Week
USDA’s World Market Price factors were again left unchanged by USDA this week. The on-farm value of long grain rough holds at $11.80 per cwt.
Rice futures had quite a week, with a drop to a new continuation chart (Nov contract) low of 12.20 on Wednesday, followed by a run up to a high of 12.88 after the Supply/Demand Report’s surprising figures were released on Thursday. Friday saw settlement in the nearby Nov contract 12.785, and the day’s action had the look of shorts trying to get out of the way of the longs emboldened by the big production/stocks drop in the monthly S/D report.
It is interesting to note that both versions of the continuation chart issued a buy signal on Wednesday, with one indicating maybe another 30 cents of potential upside movement and the other suggesting perhaps just over 40 more cents to the upside. We continue to think it too dangerous to sell into this market, but there will be a lot of long grain cut in the next several weeks, which will make it difficult to predict just what the futures might do.
If the nearby Nov drops back to or below the 12.50 level we think that buying will eventually pay off, with the risk being somewhere above 12.20 (the old low). With the size of the adjustment made by USDA, however, it’s difficult for us to see much trade eagerness to sell at very low levels.
Open interest remains right around 9,000 contracts; there are still no (zero) deliverable certificates in Chicago. If trading rice or any other futures contracts, use calm decision making and good money management before taking any positions.
Exports
This week’s net export sales report was mildly disappointing, with a total posting of 32,000 tons. Long grain was the dominant seller, starting with 11,100 tons of rough shared by Honduras, Costa Rica, Mexico, and El Salvador. Long grain milled and brown sales came in at 12,500 tons, with Ghana taking 7,000 tons (very good to see them buying again), Mexico buying 3,700 tons, and Canada picking up 1,300 tons of milled and 200 tons of brown. Medium/short grain sales posted 3,000 tons of rough sold to Turkey, while milled showed 5,300 tons – the primary buyers were Jordan for 2,000 tons and Mexico for 1,100 tons.
Export shipments for the week were also very light at a total of only 19,700 tons. Long grain rough accounted for 5,600 tons, with Honduras taking 4,300 tons and Mexico loading out 1,300 tons. Long grain milled and brown shipped out 10,400 tons, including 7,100 tons to Haiti, 1,400 tons to Mexico, 800 tons to Saudi Arabia, and 500 tons of milled to Canada which also shipped 200 tons of brown. Medium/short shipments consisted solely of 3,600 tons of milled, primarily destined for Jordan (1,800 tons), Canada (600 tons), and Micronesia (400 tons).
Asia
Asian prices were mildly mixed this week. Thai 100% Grade B held at $445 per ton fob vessel, with parboiled unchanged at $435 per ton. Viet 5% milled maintained its level of $450 per ton. Pakistani long grain bumped up to $435 per ton. Indian prices were a bit softer on 5% milled at $440 per ton and on parboiled at $425 per ton.
