Market Update - U.S. Rice Farming Industry at a Crossroads?

October 14, 2022
Harvest has finally caught up or passed the 5-year average for all states. Arkansas is 90% done, California 50%, Louisiana 97%, Mississippi 86%, Missouri 78%, and Texas 99% harvested. This would mean rice harvest should be wrapped up nationwide before Halloween, except for a few possible stragglers. Field yields continue to improve from the earliest announcements, but there are few reports of any bumper crops out there in the South or in California. Cash prices remain firm because the milling remains steady despite the chaos in Haiti and weaker-than-normal exports. We can give credit to a strong domestic market that has answered the call to keep mills busy, as the 80,000 metric tons to Iraq won’t last forever. Texas holds firm with cash prices at $17/$18 per cwt, Louisiana with $17-17.30 per cwt, while Mississippi, Arkansas, and Missouri all fall within $16.50-1$7.25 per cwt.
The strong U.S. prices, the largely unresolved issues surrounding rice grain quality for foreign markets along with the phase-in of the Central American Free Trade Agreement – DR are resulting in a major drop in exports. The inability of the U.S. rice industry to renegotiate the CAFTA-DR agreement with its customers in Central America is having and will have a negative effect on U.S. farmers as the US Rice Producers Association and the Central American Rice Federation (FECARROZ) began pointing out back in 2017. The U.S. rice industry continues to ignore and as one important industry representative mentioned last week, “we have red flags everywhere but not enough folks want to talk about the critical issues.”
Global Markets: Rice – Rising Competition in Core / U.S. Market, Mexico Complete report here
The announcement last week from the President of Mexico, Lopez Obrador regarding a new Anti-Inflationary Program continues to be met with strong resistance from throughout Mexico on every level whether the agricultural sector or consumer advocates. Several members of the Mexican congress are also protesting. It certainly should be on the radar of the US agricultural trade as it calls for the elimination of all import procedures and permits administered by the country's regulatory authorities including the service of SENASICA, the National Service of Agro-Alimentary Health, Safety, and Quality and the Federal Commission for the Protection Against Sanitary Risks (COFEPRIS). As of this writing, this new program has not been published in the Federal Register of Mexico.
The October WASDE report raised the 22/23 ending stocks from 20.9 million cwt up to 23.2 million cwt. Supplies were increased slightly because rice yields were expected to be 7,599 lbs/acre.  U.S. export forecast was lowered by 2 million cwt to 75 million. If the current pace holds, this would be the lowest total exports since 1991/92.  World rice stocks dropped because of shorter crops from both India and Pakistan. Remember that last year was India’s third record crop in a row, and Pakistan’s largest crop on record as well. Global exports dropped by just .4 MMT to 53.2 MMT. Global ending stocks decreased to 171.2 MMT, which would be the lowest level in the past 5 years.
In Asia, Thai prices held steady again, while Viet prices bumped slightly, at $430pmt and $435pmt respectively. Indian prices remain at $390pmt, helping bring some parity to the far east and middle east markets. The Western Hemisphere prices still far outpace these prices with the USA leading the way at $720pmt, Brazil at $565pmt, and Uruguay at $540pmt. 
The news was dominated a few weeks ago by the potential Railroad worker’s strike, but it was abated with a temporary fix by the current White House administration. The strike discussion is back on the table, and the timing is still bad. Railroads comprise 40% of the United States freight traffic, and the relative percentage of food in that traffic is at its highest during harvest, ie: right now. To make matters worse, this would come right during the holiday season when goods and materials for heat generation are heavily utilized. The battle continues to be over-paid time off/paid sick time for Union workers. There is no easy solution here, but the hope was that the “temporary” fix would last more than four weeks; that hope did not hold.
In the futures market, average daily volume jumped 37% up to 1,245, while open interest dropped slightly 3%, down to 7,953. Overall, the markets finished with lower volume trading and were a bit weaker than a week prior. The market seems to be testing a band with a low of $16.50 and a high of $16.85 with no direct evidence pointing to a breakout in the near term, but that can change in an instant.
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