It was a week of give and take in the rice market. After solid gains Tuesday and Wednesday for November futures, most of those were given back on Thursday with the contract closing 16 ½ lower at $17.67 ½. At this writing Friday morning, November futures are trading 23 cents higher at $17.90 ½. The market is flying blind regarding exports. But there was plenty to talk about this week on the international scene with flooding in Pakistan impacting rice and rumors swirling in India over export restrictions.
CME Rough Rice Futures, November 2022 Daily Chart. Click Image to Enlarge
Overall, the November contract has been in an uptrend since July 5th. Trading may turn dull in the upcoming week while waiting for USDA’s September assessment of the crop. If Nov. futures can close above $18, the prospects look better for a return to the May 16th high of $18.20. That price level will serve as key resistance and more specifically, a “double top” for the Nov. ’22 contract. Some added attention to marketing decisions is warranted if the November contract moves into the $18 to $18.20 price range.
The next USDA WASDE and Crop Production will be released September 12th. NASS is in the process of conducting its’ first objective field surveys. One could argue the market’s rally has been driven by declining yield expectations, which seem reasonable given the unusual heat this growing season. Furthermore, we could see some downward revision in rice acres based on the early findings in FSA’s acreage reporting.
In the cash market around eastern Arkansas, basis was steady this week. For September / October delivery, basis at mills was 23 cents per bushel under November futures. Mill bids Friday morning were near $7.83. Basis at driers ranged this week from 29 to 36 cents per bushel under November, with bids Friday in the $7.70 to $7.77 range.
Crop Progress:
In Monday’s Crop Progress, USDA estimated the U.S. rice harvest at 18% complete for the week ending August 28th, up from 15% the prior week. Louisiana and Texas’ harvest had reached 67 and 77%, respectively. Arkansas was at 4% percent harvested; slightly behind the 5-year average of 7 percent. Harvest was getting underway in Mississippi with 2% harvested at the start of the week.
Table 1. Rice Harvested (%).
State |
Week ending |
2017 – 2021 avg. |
||
|---|---|---|---|---|
Aug. 28, 2022 |
Aug. 21, 2022 |
Aug. 28, 2021 |
||
| Arkansas | 4 | 2 | 5 | 7 |
| California | 0 | 0 | 0 | 0 |
| Louisiana | 67 | 60 | 72 | 76 |
| Mississippi | 2 | 0 | 5 | 14 |
| Missouri | 0 | 0 | 4 | 1 |
| Texas | 77 | 66 | 66 | 72 |
| 6 States | 18 | 15 | 18 | 21 |
| Source: USDA NASS | ||||
Export Sales:
Thursday’s Export Sales report was delayed due to issues with USDA’s new reporting system. You may recall the confusion last week over USDA’s export sales reporting. After the initial release, last Thursday’s report (8/25) was removed soon thereafter. A few hours later the USDA issued a statement, explaining that errors in the report were due to the transition to a new reporting and maintenance system.
Unfortunately, the issues with export sales reporting haven’t been resolved. In a second statement released August 31, USDA indicated they hoped to have the new system operational by September 15th. Below is a portion of their August 31 statement:
“As a result of unanticipated difficulties with the launch of the new Export Sales Reporting and Maintenance System, USDA’s Foreign Agricultural Service will temporarily revert to the legacy system while we work to fully resolve the issues with the new system. FAS will be unable to publish weekly export sales data on Thursday, Sept. 1 or Thursday, Sept. 8, but we expect to resume regular reporting on Thursday, Sept. 15.”
The full statement from FAS can be found here.
Fertilizer Market:
With nitrogen prices pulling back from the spring highs, we get a number of questions about coverage for 2023. No two years are exactly alike and the current situation in eastern Europe adds a tremendous amount complexity to forecasting fertilizer prices. Recently, we ran across an interesting article by DTN contributing writer, Elaine Kub Best Time of Year to Buy Fertilizer: Seasonal Patterns.
Her findings on urea indicate the first week of September has tended to show the lowest “z scores” or time of year with prices below the season average. In fact, the period from August to December had negative z scores. We found similar results constructing a seasonal index of retail urea prices collected by USDA (shown in the graph below).
Retail Urea Seasonal Price Tendency, 2014 – 2020. Source: USDA AMS, Illinois Cost of Production Report.
Industry analysts believe urea prices will remain supported by nitrogen production outages in Europe. Along with this outlook, some in industry are encouraging growers to go ahead and book at least a portion (25 to 50%) of 2023 nitrogen needs. To support this advice, New Orleans (NOLA) urea prices are again working higher, trading in a range of $560 to $695 to start the week. The prior week’s range was $542 to $578.
Driving this is ammonia, which has increased 15% so far in this quarter. NOLA price direction generally drives inland urea prices. Phosphate and potash prices at NOLA and inland were generally flat to lower last week. There seems to be less urgency to move on phosphate and potash booking for 2023.
Farm Futures released the results of a 2023 acreage survey this week. Indications are 2023 corn acres will increase 5% and winter wheat acres could increase 7.5%. If true, this outlook could add further support to nitrogen prices. At this writing, December ’23 corn trades at $6.14 and July ’23 wheat trades at $8.39.
