Another relatively quiet week in the rice market has transpired, with only minor revisions to the existing situation in the industry. Export sales were generally strong this week although as compared to last week’s values look to be lagging.
Any sales number that is greater than 70,000 MT per week will suffice to keep the trade on track and the mills running. Numbers in excess of 100,000 MT (see the sales report from the past two weeks) are the range that will be consistently be necessary to help wade through the tremendous old crop inventory.
The volume levels that have emerged in the past month have been enough to provide some hope that the supply problem may have a shorter term horizon than was previously thought. Vessel loadings were flagging as well but in retrospect, are not terribly surprising. It can reasonably be expected that the next two reports will likely be consistent with this week’s volume if not higher.
It is worth noting that these sales are being made at a time when the dollar is stronger than in recent trading sessions. It is very plausible that buyers are trying to “game” the currency market in order to balance inventory costs. A case can also be made that a stronger underlying demand exists overseas than has been originally thought. Time will tell which is actually the case.
The Asian pricing complex has remained rather stagnant since the last report. To illustrate more exactly, Asian prices as a whole have varied less than $15 MT in the last six months, with less than $5 MT of fluctuation since the first of the year. Similarly, the World Market Price estimate released by USDA has also remained unchanged.
On the domestic front, the U.S. cash market has entered a holding pattern as well. The current market appears to be in a holding pattern at or slightly below the lower boundary of producer willingness to sell.
Market conditions have neither improved nor deteriorated since the last report. Normally, the surge in export sales would have generated some price movement at the farm level, but with buyer inventories already high, these sales are unlikely to make a notable difference at this time.
The futures market has had a positive week with all open contracts on the board posting modest gains. The volume and open interest figures have been noticeably higher due to the near term exodus of the nearby March ’17 contract from the board. Most of the volume noted was in the two nearby contracts as hedgers and speculators roll open positions.
At the farm level, spring has come very early this year and some farmers have already begun planting the 2017 crop. The danger for late season cold snaps seems to be minimal enough along the lower gulf coast that the calculated risk was worth taking. If the unseasonably warmer weather persists, it is probable that some growers further north will be taking similar measures.
Unless the local cash pricing equation can get a significant positive boost in the near term, it is probable that the March 31 acreage report will have some very dismal projections for the 2017 crop.