The February Supply/Demand Report was released by USDA on Tuesday of this week. Changes to the long grain situation since January’s report were relatively minor. It was a bit of a surprise to the trade that USDA actually did something that was even slightly positive to the long grain situation when they increased the export projection by a million cwts and lowered the ending stocks by the same amount – now down to 28.1 million cwts.
The only other change was a narrowing of the Avg. Farm Price range estimate to $11.90 – $12.50, which was 20 cents higher on the low end and 20 cents lower on the high end of January’s projection. On the medium/short side of the ledger, supply was added to by one million cwts, use was lowered by a million cwts, and this resulted in a boost of two million cwts added to the projected ending stocks. The Avg. Farm Price is now split between the South and California, which were estimated to range between $14.80 – $15.40 in the South and $19.50 – $20.50 in California.
USDA’s World Market Price factors remained unchanged this week. The on-farm WMP value of long grain rough holds at $10.32 per cwt.
Rice futures had an interesting week, with the start of a potential bottom being formed after the long drop from 12.69 in mid-December to a 10.01 low early last week on the continuation chart. This Monday and Tuesday saw an unsuccessful attempt to take out the 10.01 low, and Wednesday andThursday were up and down respectively. Friday brought good buying – most likely from the spec shorts – into the pit, which pushed up into technical resistance in the closing hour. Settlement in the nearby Mar contract at 10.525 was up 19.5 on the day and only 2.5 cents off the high for the day.
The next couple of weeks will give us a better picture of the market, but it definitely has the technical look of a market that has finally found good support. Volume has been fairly good for the week, but some of that was due to rolling out of the Mar into more distant contract months. Open interest was off for the week at 10,075 contracts, and deliverable receipts registered in Chicago were at 1,226, unchanged for the last two or three weeks. We continue to 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.
It was a big week for net export sales, with a total of 125,600 tons posted with USDA. Long grain rough sales totaled 22,600 tons and included 9,500 tons sold to Mexico, 4,600 tons to Honduras, and a 8,500 sale posted for “unknown” which should show up in the next couple of weeks with the buying country’s name. Long grain milled and brown showed sales of 7,000 tons, with Colombia picking up 5,000 tons, followed by Canada with 700 tons of milled and 100 tons of brown, and Mexico taking 600 tons.
We need to see more milled sales on the books. The really big hitters this week were in the medium/short grain category where only milled sales were made to the tune of 96,000 tons. The top buyer was Japan with 68,400 tons, followed by another big sale of 24,200 tons to South Korea; smaller sales to Israel, Jordan, and Canada added to the week’s total with 1,500 tons, 800 tons, and 500 tons respectively.
Export liftings for the week were 26,800 tons, which included 13,800 tons of long grain rough divided between Honduras and Mexico. Long grain milled and brown moved out 5,400 tons to consignees in Mexico (1,900 tons milled), Saudi Arabia (1,600 tons parboiled milled), Canada (800 tons milled and 300 tons brown), and Costa Rica (500 tons milled). Medium/short shipments for the week included 1,400 tons of rough destined for Mexico and 6,400 tons of milled and brown shipped primarily to South Korea (3,600 tons), Canada (1,000 tons), and Saudi Arabia (500 tons).
There were no public sales in Texas this week, but some trading took place at levels recently seen on the sales: $5.00 per cwt premium over loan for conventional long grain varieties and $4.50 to $4.25 per cwt premiums over loan for hybrids, depending on the variety in question.
The market is fairly quiet, with estimates of around 2.5 million cwts of old crop long grain yet to be sold. Warm, dry weather has allowed a bit of drying in the fields, and this is encouraging field work to get ready for planting. Decisions are now being reviewed and made about what varieties will be planted in the new crop, and it will be another short year with drought conditions persisting for the fourth year severely and likely for the seventh or eighth year generally.
We continue to look for the return of good rains, with the question being, of course, just exactly when. Conditions in the Hill Country lakes are holding around the one-third capacity level, just over 700,000 acre feet of a possible 2.2 million total.
South Louisiana reports a slow and somewhat deadlocked long grain rough rice market. We are told that bidding continues in the $17.25 to $17.00 range per bbl fob farm, but growers need at least $18.00 per bbl. Some small lots of mostly conventional varieties have been sold to domestically positioned mills at the better price level, but most export/commodity millers appear to be comfortably long at present.
This market is in real need of a good sale of export commodity rice to either Iraq or Iran – both of which are poor trade candidates just now. “Normal” export demand seems to be getting the crop moved but very slowly and very cheaply. Planting will get started sometime in the next thirty days, and we hear that medium grain will be more heavily planted in the new crop, displacing some of this year’s long grain acres. This should help at least to some degree until the export markets are better.
The Delta/Arkansas/Missouri region is seeing a very slow trade. Mississippi is seeing very low bids in the area of $10.40 per cwt delivered to a barge loading facility. This is extremely weak and is getting no attention from sellers. Numbers this low will not allow growers to break even, much less make any sort of profit. A pickup in long grain rough exports will help, and the sooner the better. Most folks, however, are still of the opinion that all or virtually all of this year’s crop will move before new crop is ready to harvest.
Acres for next year are expected to be the same or maybe slightly less, but that could change if corn or soybean prices pick up in the next month or so. Arkansas notes low prices and a slow trade, too. Bids are reported to be in the $4.50 per bu level at the farm, but this is seeing no selling at present – something closer to $5.00 per bu is needed to shake some rice loose.
Farmers are looking for alternatives to rice for next year and are being encouraged by their bankers to find something other than rice – understandably so with prices this low. Price is not the problem for exporting US rice – demand has fallen off sharply and unexpectedly due to the big drop in the price of oil in the case Venezuela. Hopefully this buyer will be back in the US market soon – if not, it looks like a good slug of long grain will carried over.
At this point, it looks like the market will be better served if growers in the Arkansas/Missouri area can find something else to produce instead of long grain rice. Missouri is said to have quite a bit of old crop left to sell and move. The situation there is much like Arkansas’ – priced too low for farmers to make a profit. A number of people, however, expect to see a normal rotation in the new crop, and that could mean a good bit of rice again, potentially without a home. We need more demand for both long grain rough and milled.
Asian prices saw a few changes this week. Thai 100% Grade B maintained its $420 level per metric ton fob vessel, as did parboiled $412 per ton. Vietnamese 5% milled long grain finished the week at $358 per ton. Pakistan’s 5% long grain was unchanged at $350 per ton, with parboiled off $5 at $395 per ton. Indian 5% long grain and parboiled both held at $398 per ton and $393 per ton respectively. Myanmar’s 5% milled was better on the week at $420 per ton fob vessel, while its parboiled eased to $448 per ton.