| The spot market throughout the delta was largely unchanged once again this week. This has been the case now for three to four weeks, which is to be expected given the tight supplies and the fast-approaching new crop. Price spreads between old and new crop in Texas and Louisiana remain at $2-3 per cwt or barrel, respectively. Harvest for other grains has already started in Texas, and rice isn’t too far behind. According to the USDA, Texas is 54% headed, up from the normal 22% for this time of year. Louisiana is also ahead of schedule at 41% harvested. This week’s hot and dry weather will speed up crop maturity. Initial field reports from growers are optimistic and an early harvest bodes well for crop quality. As harvest nears, old and new crop prices should converge to the middle for both states, while Arkansas and may see more convergence to old crop pricing. The July contract has slid roughly 8% from its high back in May but may be stabilizing in the weeks ahead. When open interest is increasing, prices are sliding and volume is rising, which usually that means new short positions are being opened and bearish sentiment is on the horizon. However, in this climate, weekly open interest is falling, prices are softening, but volume is rising — signaling the shorts are now covering their positions and potentially preparing for a rally or at least some stability. With only a few more weeks left in the 2023/24 marketing year, export demand is looking relatively dialed in, and quite impressive. Mexico clearly steals the show in terms of year over year increases as shipments are up 400% year over year, but other destinations have certainly aided the market with more than 200,000 MT of paddy having shipped to Venezuela. New crop recently traded at $375 CIF NOLA basis to Central America, a sizable drop from where rice was trading a few months ago. In other words, the market appears to have largely accounted for the acre increase. Moving into the new marketing year, U.S. long grain will look for continued success in Mexico, Venezuela, and Iraq. Should these markets remain at the door for the U.S., the long grain balance sheet should remain in a healthy state and market conditions relatively favorable. However, if the demand wanes to these destinations or is slower to develop, prices could erode a little further. At present, the USDA forecasts a 25 million cwt carryout, and that is without really adjusting export or domestic demand for the larger crop. It is probable to see the USDA total use decrease by another 1-2 million cwts in the months ahead, which would bring carryout back to roughly 23 million cwts, just slightly over the 5-year and 10-year Olympic averages. |
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