| Last week we mentioned the optimistic market signals of firm pricing, strong plantings, and consistent demand. This week, we’ll look at some of the factors that elevate the risk and could be potential speed bumps. First is the geopolitical risk of Haiti and Iraq, two of the top-milled rice markets for the U.S. Haiti has remained surprisingly consistent in recent weeks despite its political upheaval and increased gang activities. There is concern that shipments could slow or stop completely if things get worse and rice cannot get discharged from the port or distributed in-country upon its arrival. The second is Iraq, where they are willing to fill their MOU with the U.S., but because of fraudulent activities and terror ties to Iran from the bank utilized to purchase rice from the U.S., the Fed has frozen transactions. There is a workout plan being developed, but it cannot come soon enough to see more milled rice exports hit the books. Of course, a myriad of other issues could crop up, but these are the two primary risk factors that could slow the positive momentum the long grain market is seeing right now. In South America, flooding in the key rice-producing state of Rio Grande do Sul, Brazil is making headlines where nearly 20% of the rice crop is still in the field. In some areas, the damage is more concentrated than in others. In the worst zones there has been loss of life and numerous people unaccounted for as reports indicate this is the worst flooding in recorded history. And it keeps raining, some sources in Brazil feel the remaining harvest will be abandoned causing already uncertain market conditions that will alter the dynamics of the Western Hemisphere rice trade. Reports from Paraguay, Uruguay, and Argentina have not been stellar upon completion of their harvests, and with a shaky finish in Brazil, it’s become clear that the U.S. will remain the dominant origin and exporter in the Western Hemisphere for the coming year. U.S. long grain prices remain at $800 pmt, while Uruguay is at $750 pmt, Brazil at $735 pmt, and Argentina at $670 pmt. It has been normal for prices to soften on the South American harvest each year simply because of increased supply; however, that might not be the case this year, and any potential softening will come from the geopolitical risk on the demand side of the equation. |
