Rice Market: Bearish Response to WASDE Report

    Rice heads at sunrise. Photo: University of Arkansas

    USDA released its’ August supply and demand estimates on Friday.  The U.S. new crop long-grain balance sheet included increased supply, unchanged domestic use and exports, and higher ending stocks.  Total Supply was increased on higher beginning stocks and production.  The increase in beginning stocks was the result of a .5 million cwt. increase in old crop (21/22) ending stocks.

    Old crop imports were reduced by .5 to 31 million and exports were reduced 1 million to 62 million.  The net result of these adjustments was a .5 increase in 21/22 ending stocks to 25.4 million.

    The initial survey-based production forecast for the 2022/23 crop year increased long-grain production from the previous forecast by 1.3 million cwt to 140.3 million, all on higher yields.  The U.S. average long-grain yield is forecast at 7,471 pounds per acre, up 69 pounds from the prior forecast.

    Long-grain production is down 3 percent from last year and is the lowest since 2019.  Arkansas’ state average rice yield for 2022 was projected at 7,550 pounds, down from 7,630 pounds last year.

    Table 1.  U.S. Long-Grain Rice, Supply and Demand.

    (unit:  million cwt.)


    2022/23 July

    2022/23 August

    Monthly Change

    Harvested Acres 1.94 1.878 1.878 0
    % Harvested 98.3% 98.6% 98.6%
    Yield (lbs./ac.) 7471 7402 7471 +69
    Beginning Stocks 29.7 24.9 25.4 +.5
    Production 144.6 139.0 140.3 +1.3
    Imports 31.0 33.0 33.0
    Total Supply 205.4 196.9 198.7 +1.8
    Domestic & Residual Use 118.0 115.0 115.0
    Exports 62.0 60.0 60.0
    Total Usage 180.0 175.0 175.0
    Ending Stocks 25.4 21.9 23.7 +1.8
    Stocks-Use % 14.1% 12.5% 13.5% +1%
    Average Farm Price ($/cwt.) $        13.70 $        15.50 $        16.00 +$0.50
    Average Farm Price ($/bu.) $          6.17 $          6.98 $          7.20 +$0.22

    Source:  USDA, August 2022.

    Domestic use and Exports for 2022/23 were unchanged at 115 and 60 million, respectively.  Projected ending stocks were increased to 23.7 million cwt, up 1.8 million from last month but still 6.7 percent lower than last year.  The 2022/23 season-average farm price was increased $0.50 per cwt to a record $16.00 ($7.20/bu.), compared to last year’s $13.70 per cwt.

    Of note, the 21/22 season-average farm price was unchanged this month at $13.70 or $6.17 per bushel.  This would result in a Price Loss Coverage (PLC) payment of 13 cents per bushel.  USDA will announce the final 21/22 season average price in October.

    In the 2022/23 global outlook, India’s production was lowered 2.0 million tons to 128.5 million as dry weather in the northeast reduced planted area.  World production for 22/23 is forecast to be slightly below the previous year’s record high.  World use is forecast at a record, up slightly this month to 518.7 million tons.  Projected 2022/23 world ending stocks are lowered 4.2 million tons to 178.5 million, mostly due to smaller stocks in India.

    September ’22 rice futures traded 7 cents lower following Friday’s USDA report.  Price support was found at $17 and the 20-day moving average (green line).  Since early July, the September contract has remained in an uptrending channel, establishing higher highs and higher lows.  Trendline support currently sits at $17.  A close below this trendline could be a bearish signal.

    CME September 2022 Rough Rice Futures, Daily Chart

    CME September 2022 Rough Rice Futures, Daily Chart.  Click Image to Enlarge

    Tropical activity has been near non-existent to this point.  Temperature forecasts for the upcoming week are below normal for August.  With some harvest set to get underway in the state, new crop futures could continue to trade in the narrow ranges seen this past week.  Worth mentioning, new crop rice basis around eastern Arkansas has strengthened some.

    Basis for August to October delivery at mills is currently 11 cents per bushel under futures.  Basis at driers for August to October delivery ranges from 18 to 25 cents per bushel under futures.

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