Market Update - USDA ERS Rice Report Lowers Exports Four Million Cwts
Reports on the market this week are much like last week. The business remains steady at the domestic level, and many are wondering how long it can keep up. Now that harvest is complete, paddy in first-hand is plentiful. There is a market for cash rice, but with slow exports and Haiti off the table, those offers will last only as long as the domestic market stays strong. The USDA ERS Rice Outlook was published this week, with the “highlight” being that the export forecast was lowered by 4 million cwt. This comes as no surprise to anyone in the industry, but it still feels like a bit of a blow to see it so bleakly scrolled across the page. On the supply side, production was lowered 1.1 million cwt to 164.3 million and imports were raised 1 million cwt to a record 45 million. On the use side, exports were lowered 4 million cwt to 71 million, while the domestic and residual use forecast was raised 1 million cwt to 142 million. These revisions netted out to an increase of 2.9 million cwt in the ending stocks forecast, up to 36.1 million cwt. Turning now to the ERS report on the global outlook, production was lowered 1.35 million tons to 503.7 million tons, 2% down from last year. This was a result of Nigeria, Pakistan, and Sri Lanka having a lighter production than a year before. The global consumption and residual use forecast are down 2.1 million tons from last year's record. Global ending stocks were lowered 2.2 million tons to 169.0 million. In Asia, prices bumped a little this week, but are still within the band prices have been trading for the past several weeks; $415-$425pmt. Viet Prices softened just a bit down to $430pmt, while India graduated from $385pmt up to $390pmt. This is the first time Indian prices have exceeded the $385pmt price threshold, and our best guess would be currency fluctuations and the strength of the dollar. That is largely what is responsible for the appreciating price in Thailand in recent weeks. Prices out of the United States remain far higher than the competition, but the domestic business is pulling more than its weight, and keeping cash offers afloat. We expect this to be the case through the holiday season and will turn a new chapter in the rice market upon entering the new year.
Rice Market and Technology Convention is Going to Puerto Vallarta, Mexico
RMTC 2023 will host its convention at the beautiful Hard Rock Hotel Vallarta, Puerto Vallarta, Mexico, from May 30 - June 1, 2023, an all-inclusive beach resort that is located 20 minutes from the excitement of Puerto Vallarta. With a gorgeous beachfront setting, the Hard Rock Hotel Vallarta is the essence of all-inclusive coastal luxury and tranquility.
Rice Market & Technology Convention will bring members together from throughout the rice industry in order to help better farming practices, to increase rice consumption, and to promote the overall rice trade in the Western Hemisphere. The convention meets this goal by providing cutting-edge technology to the grower and miller while offering the importer/exporter pertinent, up-to-date information concerning the market.
Registration and Sponsor & Exhibitor Opportunities will be available soon!
2022 Midterm Election analysis created by Cornerstone.
DISCLAIMER FROM CORNERSTONE
"Cornerstone Government Affairs assembled the following report to help clients interpret the implications of the 2022 midterm elections. As you know, this has been an extremely uncertain — and unusual — election cycle. At the time of publication, neither chamber has been called by the Associated Press, and many races remain up for grabs. We are aware that some information in this report may quickly become dated, and we will update this document periodically.
We write with the assumption that Republicans are likely to win a majority in the House of Representatives. Because we may not know who controls the Senate until after the Georgia runoff on Dec. 6, we offer insights into both a Democratic-controlled and Republican-controlled Senate. We look forward to discussing these results with you in detail as the landscape becomes clearer in the days and weeks ahead.
Market Update - USDA Report Reduces Field Yields, Raises Stocks
In a week dominated by midterm elections, the rice market bumped along in a quiet fashion with no news significant enough to rise above the polls and election results. But there was a release of the USDA’s monthly Supply/Demand report, and as expected, provided a dim outlook for the coming term. We have been discussing here the severe drop in exports this marketing year, and that has unfortunately been exacerbated by an increase in imports as well (typically Jasmine and Basmati rice). There was a reduction in field yields to help reduce the supply, but not enough, as the USDA increased ending stocks by 2.3 million cwt, up to 23.2 million cwt. This is an increase of stocks by 11%.
On the ground, Arkansas has conditions much like last week; there are some offers out there but not in large volumes. There has been a bump in the futures market, but not in a significant fashion. Mississippi is reporting welcomed rains that will help increase barge traffic once again, which is good news for more than just the rice industry. Louisiana has reports of paddy boats headed to Mexico, with some delay in the most recent one.
In Asia, the market remains firm where it has been these past few weeks. Thailand has priced at $425 pmt, Viet at $430 pmt, and India at $380pmt. It is conveniently “business as usual” in much of the rice world, perhaps except for some traders trying to discover the finer points of the Indian tariff.
A quick update on the potential rail strike would show that the crisis has been averted once again, this time by extending the “cooling off period” through December 4. The original date was November 19th. This provides more time to come to an agreement among all Unions, and hopefully find a win-win for the entire supply chain.
The USDA Export Sales report shows net sales of 37,500 MT this week, which were primarily for Canada (17,700 MT), the United Kingdom (10,400 MT), Haiti (7,100 MT, including decreases of 100 MT), Guatemala (900 MT), and El Salvador (500 MT). Exports of 33,400 MT were primarily to Haiti (22,100 MT), Mexico (3,700 MT), Canada (2,700 MT), South Korea (2,700 MT), and Jordan (700 MT).
South Louisiana Rail Facility Loading Terminal, Ready to Load
Located in the southwestern part of Louisiana, on the Calcasieu River, and with ample water and rice supply, the South Louisiana Rail Facility Loading Terminal has its barge loading terminal ready to load. This new facility is another alternative in the marketplace for Southwest Louisiana and East Texas rice farmers.
Washington, D.C. Update
Sen. Boozman Sends Letter on COVID-19 Relief Accountability
This week Sen. John Boozman (R-AR), a Ranking Member of the Agriculture Committee, sent a letter to Agriculture Secretary Tom Vilsack raising concerns over the use of unobligated COVID-19 funds for unauthorized purposes. In the letter, the Senator requested an accounting of the $11 billion of support provided in relief through the FY21 appropriations bill. The letter can be found here.
House Members Introduce MAP and FMD Program Expansion Bill
This week, a bipartisan group of six members of the House of Representatives introduced the Supporting Market Access to Reinvigorate Trade (SMART) Act. This bill would increase the funding available for the Market Access Program (MAP) and the Foreign Market Development (FMD) Programs. These Department of Agriculture programs help support new market creation for American agricultural products. This bill was originally introduced by Reps. Jim Costa (D-CA), Jimmy Panetta (D-CA), Cindy Axne (D-IA), Dan Newhouse (R-WA), Kim Schrier (D-WA), Tracey Mann (R-KS), and Ashley Hinson (R-IA).
Market Update - U.S. Rice Market Needing an Export Boost
The market marches on with little change from last week. Domestic business is keeping the mills busy, while exports are “off the table” for the time being to Haiti or Iraq. Paddy prices remain firm in all regions, though it would appear there is a softening coming if our export demand doesn’t pick up a bit. And to say that paddy prices are firm could be a bit misleading; the market is relatively thin right now with minimal activity, but that is to say, prices haven’t dropped by any significant margin in Arkansas, Louisiana, Mississippi, or Missouri. They all remain in the $17/cwt range. In Texas, the harvest of the second crop is slowly getting underway, but it will take until the end of November to get a good handle on how things are shaping up here. There was USDA GAIN Report published this week on India and Thailand. While we don’t compete directly with these eastern markets, they do set the global price well below U.S. prices, where the spread between the Eastern exporters and the U.S. seems to be testing new highs each week. In India, the GAIN report expects rice production to be down 6% this year, which equates to 122 million metric tons. This is on account of unseasonal rains in October that resulted in poor harvest conditions. The monsoon was also a bit more sporadic than normal, which resulted in more volatile conditions and decreased yields overall. Milled rice quotes from India have increased since they announced their selective export ban, with prices now hovering around $385 pmt. U.S. long grain prices have seen quotes at $725 pmt, which results in a spread of $340. The USDA GAIN report from Thailand revised total rice production to be down slightly to 19.9 million metric tons because of field damage resulting from floods. It is estimated that about 210,000 acres of main crop rice were damaged as a result of Typhoon Noru, and this accounts for the majority of the loss. Despite this, the report indicates that Thailand is still expected to export 7.5 MMT of rice this year, which is 23% higher than last year. This is a result of a weakening Thai baht, available supply, and recovery from the pandemic. While the weak baht and available supply are attractive to a competitive rice price, there is still a challenge with high freight costs. Thai export prices have been hovering at $410 pmt, compared to the U.S. long-grain at $725 pmt, which results in a spread of $315 pmt. And finally some good news in the weekly USDA export sales report. Net sales skyrocketed to 119,200 MT this week, an increase of 202%. Exports registered at 101,000 MT, another 207% increase there. There is certainly catching up to do, and this is a welcome development. Mercosur rice continues with an important presence in Mexico and Central America, however, the tightening of supplies, the dollar in Brazil along with the fallout from the recent presidential election are contributing to a much more difficult marketplace. The Mercosur rice crop continues the planting process and is anticipated to be what is considered a good size crop. The CONMASUR organization made up of the major rice mills in the 5 Mercosur countries will be having their regular meeting in Asuncion, Paraguay later this month. The numbers to be released by each country is certainly of interest to the market and the RA will report them accordingly. In the futures market, the average daily volume slipped by 6.36% down to 1,710. Open Interest also fell, down to 7,226 or a drop of 12.1%.
Texas Rice Council Hosts Guatemalan Millers
On October 24th, 25th, and 26th, the Texas Rice Council in partnership with the US Rice Producers Association (USRPA) hosted a large contingent of leaders in the Guatemalan rice industry. Owners and executive staff from 12 mills, as well as the Director of the national rice organization, ARROZGUA, made up the group. Nineteen men and women participated in the reverse trade mission. The group visited farmers across the rice growing area from Inez to China, TX. They enjoyed meeting farmers, inspecting the crop, and riding on a combine. Tours of on-farm and commercial drying and storage facilities showed how rice is dried to storable moisture and gave them insight into how the rice is identity-preserved and traceability is ensured. Visits to marketing offices showed another step in verifying the characteristics of the rice, its location, and the services marketing offices provide, such as price discovery, lien and title searches, and payouts, as they assist in making the sale of rice more efficient and effective. The trip culminated with a tour of the Hansen-Mueller facility at the Port of Houston. Once again, the group asked questions about traceability and received explanations of the efforts Hansen-Mueller takes to preserve the quality and integrity of the shipment. In 2016, a group of Texas producers visited Guatemala to observe programs their rice check-off dollars helped fund to increase rice consumption and U.S. sales into the country. In 2019, when the Port of Houston opened the opportunity to ship rough rice, rice with the hull on it, talks began on selling Texas rice to Guatemala. Covid-19 put those efforts on pause. At the Rice Market and Technology Conference in Cancun, this year efforts resumed. During their time in Texas, old friendships were strengthened, new friendships were made, and the common bond of helping to feed the world produced in-depth discussions of moving rice from Texas to Guatemala. Concerns millers had come to light as they experienced firsthand how the rice crop is cared for in Texas and they left with the knowledge that Texas is a source of high-quality identity-preserved rice. Also on the trip, Curtis McCoy, Rice Marketing Specialist for the USDA Foreign Agriculture Service (FAS), participated in the reverse trade mission. Texas rice producers’ promotion check-off dollars are pooled with promotion dollars from other states through the US Rice Producers Association, which is an independent cooperator with FAS, to promote the sale of U.S. rice, in all forms, around the world. Curtis enjoyed field visits with the farmers. He found very insightful the efforts made to protect the quality of the rice as it is dried and stored as well as the efforts to ensure traceability from the field to the vessel. Curtis felt the closeness of the relationships that have been developed over time between Texas farmers, USRPA staff, and leaders of the Guatemalan rice industry. In closing, Texas rice farmers are appreciative of the expertise and relationships the staff of the US Rice Producers Association has with buyers of rice throughout the world. All business starts with good relationships. This reverse trade mission once again shows the money Texas rice farmers contribute toward promotion, education, and market development is being used effectively and efficiently.
Some of the millers that visited Raymond Rabius’ Farm.
Darryl Socha, General Manager of Rice Farmers Co-op, explains how they track the rice through the drying and storage process.
Tony Sanchez, Vice President of Operations at Rice Belt Warehouse walks the millers through how they preserve the identity of every lot of rice and ensure traceability.
Diego Pivaral inspects grains of rice for clarity and imperfections.
Galen Franz visits with millers at his Inez farm location.
Jake Pennington, General Manager at American Rice Growers, in Raywood, separates brokens from whole grain while determining the grade on a sample of Presidio. The variety the millers preferred.
Josey Dishman, Chairman of the Texas Rice Producer Board, visits with Marcela Garcia, President and CEO of USRPA, and millers.
Cris Brown, Export Merchandiser for Hansen-Mueller, discusses the services they provide to facilitate exporting rice to Guatemala.
ARROZGUA presents USRPA CEO, Marcela Garcia, with a plaque celebrating 25 years of partnership.
Washington, D.C. Update
USDA Launches Loan Assistance ToolThis week the Department of Agriculture (USDA) Farm Service Agency launched a new tool to assist agricultural producers in navigating the farm loan application process. The USDA tool is available in 2023 and would streamline the application from 29 pages to 13 pages and improve online functionality for applicants. The tool can be found here.
USDA Announces East Africa Trade MissionThis week, the USDA announced Deputy Secretary Dr. Jewel Bronaugh will lead an agribusiness trade mission to Kenya and Tanzania from October 31-November 4. Representatives across the agricultural sector, including the rice industry, will travel to East Africa in hopes of strengthening ties and building partnerships in support of American agricultural products. This announcement follows last month’s launch of the U.S.-Kenya Strategic Trade and Investment Partnership.
USTR Rejects Section 301 Investigation PetitionThis week, the Office of the U.S. Trade Representative (USTR) announced it rejected a petition to conduct a Section 301 investigation into claims of unfair Mexican imports impacting U.S. produce. The petition argued that Mexican trade practices pose a threat to Florida’s agricultural sector. In response to the initial petition, Senators Chuck Grassley (R-IA), Joni Ernst (R-IA), Roger Marshall (R-KS), and Patty Murray (D-WA) sent a letter to USTR Ambassador Katherine Tai urging against the petition. They noted the importance of the Mexican market for many American products, including rice, and cautioned that failure to reject the petition could cause Mexico to retaliate and would increase food prices for American consumers. The letter can be found here.
Market Update - Rice Market Continues a Complicated Path
Harvest is complete, and that’s the good news. With all eyes turned now to marketing the crop, there are several challenges that must be overcome in the local and global market. For starters, yields were off by about 5% in most states this year. That’s not the end of the world, but always hits farmers in the pocketbook when this is the case. Worse for the mills though, is that the milling yields are also off compared to historical figures. Mills are citing that it would be an improvement to have an average head rice of 55 this year, and that seems to ring true in all southern states. Lighter yields and poor quality lead to a reduced supply, which often results in higher prices. This is likely not the case this year because prices are already so high; be that cash prices to farmers, paddy shipments to Mexico, or milled rice domestically.
Looking at paddy shipments to Mexico might provide the starkest example of where the long grain industry finds itself. The U.S. industry used to enjoy almost 100% rough rice market share in Mexico, but that has deteriorated significantly in recent years due to multiple factors. Mexico now finds itself oversupplied with rice from South America, namely Brazil. Most warehouses are filled, and there are initial reports that consumption may be decreasing in the region. Remember that Mexico also passed an “anti-inflation” bill that resulted in zero duties on rice imports from South America and other origins. This was supposed to end on December 31, 2022, but has already been extended through the first quarter of 2023, with speculation it will get extended beyond that. To boil it down, U.S. rice is more than 20% more expensive than Brazil and the other Mercosur origins, and any freight advantage is currently a non-factor. Mexico warehouses are full, domestic consumption may be down, the zero import duty has been extended, and the value of the dollar continues to increase, making exports more difficult. We don’t bring these points up to paint a dramatic picture, but to bring to light the reality of the situation this market is facing as we sell this year’s crop. We realize stocks in Mercosur are getting low as planting season there is in full swing. Markets can change quickly and it was only a couple of years ago that Brazil purchased several paddy vessels from the U.S. Many believe that 2023 will be a pivotal year as we will begin a formal process for the next farm bill that will take vital importance.
Currently, the export sales report shows that exports are off by approximately 50% from this time last year. While this trend may not continue for the duration of the year and is likely overstated, it does paint a picture that our exports are seriously lagging behind historical norms. It is difficult to see any of this changing before the new year, and at that point, we will need a big buyer like Iraq to come to market, or a miracle in Haiti so that we can actually unload the rice we have ready to deliver there. The domestic market remains strong and is the sole bright point at the moment. All this to say, if you’re a producer holding rice and have the offer to sell, it might be a good time to consider liquidating and not waiting for higher prices in the future. They certainly could materialize, but there are several factors that could inhibit that from happening in the near term.
In Asia, prices seemed to have softened a little bit. Thai 5% is quoted at $410pmt, down from $415pmt last week. Viet also dropped $5pmt, down to $425pmt. India continues to be the lowest, right in line with last week in the $380-$385pmt range.