USDA’s World Market Price factors were lowered this week by 4 cents on long grain and by 17 cents on medium/short grain. This adjustment was made due to technical milling factors as well as market conditions. The on-farm WMP value of long grain rough drops to $10.32 per cwt.
Rice futures fell sharply on Monday and then on Monday night (part of the Tuesday session) to a new, nearly-5-year low of 10.01 in the nearby March contract. As the sun was rising on Tuesday morning, however, the buyers came with it.
The balance of the week saw a good bit of buying/profit-taking/short-covering, and Friday’s settlement was 10.74 in the nearby March contract, just a penny off the high for the week and 17 cents over last Friday’s settlement. We will have to see how the market acts over the next week or so, but it’s quite possible that almost hitting the 10.00 level was too much overdone and too far away from fundamental value/cost of production for long grain.
A look at the chart infers a push to the 11.00 area in the nearby contract – then we see what it does from there. We did not expect the nearby to drop as low as it did, and we hope that 10.01 was the bottom – for this year anyway. Volume was good all week, being particularly heavy during the Monday and Tuesday sessions. Delivery certificates registered in Chicago are now at 1,226, and open interest stands at 10,241 contracts – both as of Thursday’s close of business.
Even more so than usual, we strongly recommend that if you are trading rice or any other futures contracts, use calm decision making and good money management before taking and while holding any positions.
There was one public sale this week in Texas, this time from the west side of Houston where 115,800 cwts were shown yesterday morning. The offerings were very heavy on the XL745 variety, which drew bids of $4.50 to $4.51 per cwt premium over loan, along with a few conventional variety lots where $5.00 per cwt over loan was the bid. Everything was turned down – there were no confirmations.
It’s estimated that just over 70% of the Texas crop has already moved or is committed, and it probably won’t be long until the entire crop is spoken for. With the drought-reduced rice acreage going into its fourth year, Texas farmers are looking for planting alternatives. One of those is milo which seems to have a very good, positive basis at the moment.
South Louisiana continues to feel the effects of Iraq’s absence from the U.S. market. We heard that some long grain traded at $18.00 per bbl at the farm early this week, but the week came to a close with bids at $17.25 per bbl fob farm for conventional varieties and $17.00 per bbl for hybrids. Both of these figures are very, very cheap and likely cannot be accepted by most growers without suffering a substantial loss.
Since the lack of demand rather than price is what seems to be keeping us from selling either paddy or milled, we see this very low bid as a signal to the market that the buyer doesn’t really want to buy right now. Even though the export demand is slow and somewhat weak, it still looks to us like all of the current crop long grain in this area should move before new crop is harvested. And with bankers looking ever more closely at what will work, we suspect that less long grain will be grown in the new crop, as it is replaced by medium grain production – at least for the coming year.
The only price indication we heard in Mississippi this week was at a level well below $11.00 per cwt delivered barge loading facility – a level that will not allow the farmer to finish in the black in most instances. Even so, Mississippi seems to have already moved a fair amount of the crop, with reports that the entire crop is expected to be bought/committed as the current crop year comes to a close.
But prospects for next year are not very promising and we understand that bankers may be ready to pressure some growers into looking at planting something other than rice. In many cases, it looks like the growers themselves are seeing that the low price expectations will not work. Current alternatives seem to be soybeans and/or corn.
Arkansas reports a similar situation, but with perhaps a bit more rice to move before the year finishes. We are hearing that current bidding is around the $4.41 per bu level delivered, and that is extremely low – perhaps lethally low and totally unacceptable in many cases. There is too much long grain in this area this year, and questions are already being asked as to what will happen as the current marketing year comes to an end. This market does not need anything else weighing it down, and any sizable long grain carryover will be bad for all long grain producers in every state.
Missouri seems to be in a similar situation as Arkansas, with a good bit of the current crop yet to be sold and moved. Bids are too low to be of interest to sellers at present – more export paddy demand is needed overall, but especially up here. We can’t tell just what is being considered for next year – from some directions we hear that a normal rotation is anticipated, while others tell us the banks are starting to ask questions about how rice will make a profit next year.
Net export sales registered with USDA had a good week with a total of 60,600 tons being posted. Long grain rough showed only one net sale to Honduras for 8,800 tons. Long grain milled and brown captured the headlines this week with a total of 44,600 tons listed. The big hitter was Colombia with 31,500 tons of milled, along with Saudi Arabia with 6,000 tons of parboiled milled, Mexico for 3,800 tons milled, and Canada with 2,700 tons of milled and 400 tons of brown. In the medium/short column, only milled sales with a total of 11,300 tons were posted. This included 5,000 tons sold to Jordan, 3,600 tons to Japan, 1,100 tons to Taiwan, 600 tons to South Korea, and 400 tons to Canada.
Export liftings for the week also totaled 60,600 tons, which included 32,500 tons of long grain rough loaded out for Costa Rica (17,700 tons), Honduras (8,800 tons), Guatemala (4,700 tons), and Mexico (1,300 tons). Long grain milled and brown shipped out 23,400 tons, with the largest consignee being Haiti (16,700 tons milled), followed by Mexico (2,600 tons milled), Canada (1,600 tons milled and 300 tons brown), and Saudi Arabia (1,200 tons milled). Medium/short grain shipments totaled 4,800 tons, with 700 tons of rough going to Mexico, 100 tons brown and 1,000 tons of milled to Canada, 700 tons of milled to South Korea, along with 500 tons milled each to Jordan, Japan, and Mexico.
Asian prices saw a few changes this week. Thai 100% Grade B held at $420 per metric ton fob vessel and parboiled added $2 and was quoted at $412 per ton. Viet 5% long grain slipped to $356 per ton. Pakistani 5% milled was off considerably at $350 per ton, while parboiled held better at $400 per ton. Indian 5% milled was quoted at $398 per ton and parboiled was noted at $393 per ton – both off by $2 per ton. Myanmar 5% milled was solid at $415 per ton, while its parboiled was up $5 at $460 per ton – all prices fob vessel.