VOL. 15; ISSUE 42

OCTOBER 26, 2018

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VOL. 15; ISSUE 41

OCTOBER 19, 2018

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VOL. 15; ISSUE 40

OCTOBER 12, 2018

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Texas Rice Council Meets in Katy

Texas Rice Council held their regular October planning meeting in Houston this week with Tommy Turner of El Campo presiding as President of the organization. Rice farmers from the various counties of the Texas rice region participated and commented on their harvest results and conditions. Of particular concern to everyone was the lack of market demand for rice and the lack of storage available with the second crop harvest approaching. A lengthy discussion followed related to an on-going Texas rice industry sustainability project effort. Hopefully, the results of this project will be available for January 16, 2019, Texas Rice Council/Western Rice Belt Conference that will take place in El Campo.
Several board members commented on their recent trip to Guatemala, an important rice market for the U.S. Tommy Turner, Galen Franz (Victoria), Scott Savage (Bay City), Casey Smith (Hitchcock) and Trey Barker (Katy) traveled to Guatemala to observe rice promotional efforts conducted through a joint agreement of the USRPA and the Guatemala Rice Council (ArrozGua). The group also visited the farm of Alvaro Padilla and the ALCSA rice mill in addition to meetings with other leaders of the Guatemala rice industry. The Texas farmers also visited Todd Drennan and Sean Cox of the USDA’s Foreign Agricultural Service in the US Embassy. Dr. Thomas Wynn and Dennis DeLaughter gave a World/US/Texas marketing report that as usual, generated considerable discussion among the farmers on the board. The group reviewed by-laws, the board election process and a financial report was given among other administrative issues.

USMCA Includes Significant Support for Biotech

The new trilateral trade agreement between the U.S., Mexico, and Canada (USCMA) takes a very forward-looking approach to support agricultural innovation. A new Agricultural Biotechnology Section confirms “the importance of encouraging agricultural innovation and facilitating trade in products of agricultural biotechnology, while fulfilling legitimate objectives, many are pointing to the biotechnology provisions as a key achievement for agriculture that will serve as a model for future trade agreements. “The USMCA sets important new standards for U.S. trade policy by ensuring trading partners establish policies that protect, respect, and advance the hard work and investment needed to bring new biotechnology innovations from the lab to the marketplace,” said the Biotechnology Innovation Organization (BIO).

The agricultural biotechnology section aims to minimize trade disruptions. The agreement lays out a path for how to cut down approval time for new biotech traits and deal with imports of genetically modified crops that have not been approved, so-called “low-level presence occurrences.” The section also includes the establishment of a Working Group for Cooperation on Agricultural Biotechnology. The Working Group will provide a forum for Parties to exchange information, discuss any policy and trade-related matters, and work to advance trade policies and science and risk-based regulatory approaches with other countries and international organizations. These provisions are expected to facilitate innovation and ultimately approval of future technologies.

Looking forward to ratification, there is a possibility that government leaders will sign the Agreement at the upcoming G20 Summit in November. After signing, the government leaders will submit USMCA to the various legislatures for ratification. Trade Promotion Authority (TPA) determines how quickly a U.S. Congressional vote on the agreement could happen. At least 30 days prior to the introduction of implementing legislation, the President must submit to Congress the final agreement text and draft Statement of Administrative Action. 105 days after signing, the International Trade Commission submits a related report to Congress. These requirements assist Congress in its consideration of whether USMCA meets TPA’s negotiating objectives. U.S. lawmakers have also stated they will be looking at the impact of USCMA on trade liberalization as well as the domestic manufacturing sector.

Rice Market Update: Near Term Market Outlook Has Positive Scenarios

The rice industry continues to move along with even more news to digest since the last report. The weekly export sales report indicated another boost in net sales nearing a total of 58,000 MT for the week. This number remains far from optimal but is still enough to be considered healthy for the industry. Additional sales to Iraq or even a few thousand metric tons to Central or South America would be highly welcomed at this time in an effort to alleviate the current glut of rice in the marketplace. Vessel loadings were notably higher than last week with volumes nearing 95,000 MT. Some of this is reflective of the recent high-volume sales but the remainder is an indication that old sales on the books are beginning to be filled. Both of these scenarios are positive for the near-term market outlook.
In Asian markets, the benchmark origins were mostly sideways over the week with some price weakening in key areas. The magnitude and direction of the changes seem to suggest that changing currency valuations had the lion’s share of the action as opposed to true supply and demand fundamentals.
USDA released its world market price this week and ultimately lowered the indicator for both long and medium/short grain classes of rice. This comes as a minor surprise, but optimism remains for an upward adjustment to occur in the coming weeks. The futures market had a rollercoaster ride over the week after last week’s massive gains. The trading action started out bullish with a continued rally, but the interest rate increase on Wednesday sent the financial markets into freefall and ultimately dampened the momentum in the rice market. Thursday’s WASDE report was more neutral to bullish than anything else, but the futures contracts had a different take and the resulting decrease brought the open contracts on the board back into negative territory for the week.
The domestic cash markets continue to soften as harvest pressure from the Upper Delta weighs into the equation and has the expected effect of suppressing prices down river. Along the Gulf Coast, storage is still an issue (especially in Texas) which is having a similar impact in those areas. The harvest in Mississippi is in the final throes while Arkansas and Missouri report well over two thirds of the rice having been harvested at this time. Quality reports indicate lower milling yields in those areas than was hoped for.
In other news this week, the UDSA released its monthly World Agricultural Supply and Demand Estimate (WASDE) with no significant surprises. The revisions for this month were exclusively on the supply side of the equation and consisted primarily of a decrease in average yield by 24 pounds per acre. This decrease led to a downward revision in the overall supply number by 700,000 hundredweights. With no demand side revisions (the Iraqi sales having seemingly been already incorporated into the estimate) the ending stocks estimate was adjusted accordingly by 700,000 hundredweights with no impact on the season average farm price projection.

Market Update: Rice Sales to Iraq Help Alleviate Harvest Pressure

Things have become more lively in the rice industry over the week as more information becomes available and the market factors appear to be more favorable to movement. The export sales report for the week reported low volume for the current installment, a roughly 70% decrease over the volume of the previous report. Of note is the sale to Iraq that should show up on the next week’s report of a much needed 90,000 MT. This sale, while much anticipated, will help to alleviate some of the pressure on the industry resulting from a large 2018 crop. Vessel tonnage was up from the previous report, and as a percentage increase looks to be very positive. From a tonnage perspective, the increases were marginal but as additional sales show up to be shipped, in addition to the volume already on the books, this figure should be stronger in the weeks to come.

Asian pricing generally appreciated over the week for the benchmark origins. Most, if not all, of the changes, were due to currency valuation changes but the firmness at current levels indicates that there is some stability at this time. The USDA World Market Price estimate for the week saw increases for both long and medium/short grain classes. Given the general direction of the market over the past weeks, this adjustment was somewhat predictable. Again, given the stability of the market currently, the probability of further significant increases is limited.

In the domestic cash markets, very little has changed in most areas with bids remaining in stagnation due to harvest and storage pressure in the various regions. From a production standpoint, the harvest in the Upper Delta continues to roll in and estimates peg that it is almost three-quarters complete in aggregate. Along the Gulf Coast, unseasonably heavy rainfall has delayed the second crop progress to the point that quality and yield are becoming seriously affected. The futures market has had an extremely good with the advent of positive marketing news. All of the open contracts on the board posted positive gains nearing 9% over last Friday’s close. The reasoning for the positive movement is multifold. The finalizing of the USMCA agreement early in the week set the market off to a positive start and the eleventh-hour sales in the export market went on to further the gains. Next Thursday sees the monthly WASDE report from USDA that will have some market changing impacts. Some expectations in the report include revisions to the projected yield numbers as well as export and stock projections.

VOL. 15; ISSUE 39

OCTOBER 5,2018

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