USDA lowered World Market Price factors this week. The on-farm WMP value of long grain rough rice declined 27 cents to $10.36 per cwt. MG/SG dropped the same amount, to $10.63.
The bulk of the action this week was in the futures market in Chicago. Not that it was much action by historical standards, but the best the market can muster in its current sick state. The market closed the week off 44 cents in the March, 43 cents in the May, and 44 cents in the Jul.
Total open interest, however, rose 1,002 contracts to 9,745 contracts. This is the highest level and largest gain in the past three months. Where it gets confusing is that one technical analysis service calls the market a “100% confirmed sale” even after today’s 29 cent drop. In their terms, the trend is down, all indicators are down, and one should sell. Other technical analysts, to the contrary, believe the market is “over-sold” and could “explode in an upward correction” at any moment.
They point to the large short position that the managed money funds are carrying, and how quickly the market will rise when those funds decide to cover their short positions. There is some evidence to justify this interpretation — on Thursday morning, March futures jumped 63.5 cents from Wednesday’s close on heavy volume.
The rally petered out and at the close the market was only up 12.5 cents. The action was cited as an example of what will happen when one of the computers the funds use decides it’s time to get out. At first some thought this was evidence of Iraqi buying — no such luck. The second theory was that the Thai government had received unexpectedly strong bids on their first public auction — maybe. The third theory was that an unnamed buyer and seller had concluded a deal for 30,000 MT of milled rice to go promptly to Colombia as the country is out of rice — maybe but so far not proven.
The point is that an unexpected sale of moderate volume could set off the US market. Substantial progress in reducing the Thai surplus would be very positive for the world market. There are more potentially positive things than negative things at the moment. Even the “sell-sell-sell” analysis puts support at $10.31.
Deliverable certificates registered in Chicago are 50 contracts lower at 1,226. If trading rice or any other futures contracts, use calm decision making and good money management before taking any positions.
It was an odd week for export sales, which posted a 67% decline from the prior week on a cancellation of 35,600 MT of long grain rough rice to Mexico. Last week exporters reported 74,900 MT in sales to Mexico. If someone was attempting to mislead the market, they succeeded. Total net sales this week were 32,600 MT, comprised of negative 22,500 for long grain rough, 45,600 MT of long grain milled, and 9,300 MT of medium grain milled. Destinations of note included Colombia buying 16,000 MT of long grain rough rice plus 17,200 MT of long grain milled rice.
There is some chatter that these sales are at least partially outside of the quota established by the free trade agreement. Other long grain milled buyers include Haiti (18,600 MT), Mexico (4,100 MT), Canada (3,400 MT), and Saudi Arabia (1,300 MT). In the medium grain market, Jordan purchased 6,200 MT, South Korea 1,400 MT, and Canada 1,300 MT. No other destination accounted for more than 1,000 MT of all types of rice.
Export shipments for the week were down 50%, but totaled a very respectable 74,300 MT. The big destination were Mexico (33,900 MT, of which 31,200 MT was long grain rough, and 2,600 MT of long grain milled. Second place went to Haiti with 14,200 MT of long grain milled. Japan shipped 12,100 MT of medium grain milled, while Colombia got 7,200 MT of long grain milled. Shipments to Canada totaled 3,000 MT.
Asian prices made small moves this week, mostly down. Thai 100% Grade B maintained its $420 price per metric ton fob vessel, while Thai parboiled added $5 to be called $415 per ton. Vietnamese 5% long grain milled eased again and is now priced at $358 per ton. Pakistani 5% long grain slipped $5 to $360 per ton, even as parboiled held at $405 per ton. Indian 5% long grain milled dropped $2 to $398 per ton, as did its parboiled at $393 per ton. Myanmar’s 5% milled remains at $415 per ton, while its parboiled added $5 and moved to $460 per ton. Many of these changes are due to changes in the exchange rate between the US dollar and the local currency.
Note on Colombian market: USRPA sources in Colombia report that 2015 has started with a severe rice shortage. Closing out calendar year 2014 with an inventory of 290,000 tons paddy basis and taking into consideration the low production that are anticipated during the first months of the new year, there is an obvious significant shortage in the Colombian marketplace. The inflated rice market is 40% higher than the previous six weeks and the shortage of rice on supermarket shelves provides evidence of debacle caused by price control measures.
In 2015 Colombia will import 90,152 tons of milled rice, administrated via the auction mechanism of the Tariff Rate Quota system (due to the Free Trade Agreement). This volume will fall short of the market deficit calculated to be at 300,000 tons.
Of particular concern to U.S. rice farmers is the fact that Colombia would gladly import a minimum of 200,000 tons of paddy rice outside of the FTA quota and gladly pay the required duty. However there continues to be what many have called a “political pest” or rice smut presence that Colombian officials claim is not present in their country. Colombia is the only country in the Western Hemisphere with such a regulation on imported paddy rice from the United States. The US Rice Producers Association continues dialog with APHIS and the Colombian rice sector on this particular issue.