We are finally caught up with planting in Arkansas—a welcome sign to all farmers, processors, and industry members. Despite the return to normal after poor weather that severely delayed planting, it will still be a victory to exceed 1 million acres of long and medium grain combined in the state. There is concern that the later planted rice will follow historical trends and yield slightly less than normal, but this is a tradeoff all are willing to accept given the other option of no rice at all. The core domestic business continues to be the primary driver looking forward for milled rice, as Iraq has found ample supplies in Asia and Haiti’s political disruptions prevent bookings and subsequent distribution to the Haitian people.
Although export demand for U.S. long grain rice is down only 2.6% year to date, it would be down roughly 10% if the Iraqi business didn’t materialize. In other words, exports to most other origins are off this year. As Brazil concludes harvest and looks to merchandise its rice, the U.S. can expect ongoing stiff competition in Mexico and Central America. Just this month, Mexico has declared an emergency because of the increasing food costs. As a result, the Mexican government announced the removal of most import duties on food supplies. This includes paddy rice of any origin for several CAFTA countries where tariffs are going to zero in order to suppress food inflation. This will further erode the U.S. market share because of our higher prices. In the case of Mexico, the duty free import measure for rice is only on rough rice and milled rice was not included in the new policy. These set of conditions will make for interesting discussions at the Rice Market & Technology Convention scheduled for May 31 - June 2 in Cancun, Mexico where more than 175 rice businesses have registered to attend.
The rice world is wrought with complications. Front and center are the disproportionate impacts of the fuel and fertilizer costs to rice vs. other crops like corn and beans. This problem is only exacerbated by the hamstrung wheat trade, courtesy of the Russia invasion. Most analysts expect the volatility to worsen as we move into the Fall. Water shortages in Pakistan are having a large impact on rice growing provinces, such as Punjab and Sindh, which will likely hinder output from this region. However, there is no sign that India will reduce their production or exports, further depressing export prices for rice worldwide.
In Myanmar, the government surprisingly decided to modify the rate of the kyat to the detriment of exporters. This forex restriction has ultimately made the country less competitive in the global market restricting them to border trade only. To make matters worse, Myanmar farmers cultivated fewer acres due to poorer economics; higher fuel costs, fertilizer, and chemical costs, not to mention credit issues, are all factors that have driven rice prices higher.
In Thailand, prices have remained similar to last week around $445pmt, and they are home to Iraq’s purchases for the time being. Vietnam is cheaper, in the $415-$420pmt range, keeping busy fulfilling Filipino demand. With these prices from Thailand and Vietnam, one would think that India would be interested in raising prices; however, they remain at a discount of at least $65pmt in comparison. The subsidies given to farmers to produce the record quantities and the subsequent exports make it extremely difficult for other origins to be competitive.
The weekly USDA Export Sales report shows net sales of 13,100 MT this week, down 55% from the previous week and 57% from the prior 4-week average. Increases primarily for Canada (4,000 MT), Honduras (3,700 MT), Guatemala (3,000 MT), and Mexico (2,000 MT), were offset by reductions for Haiti (300 MT). Exports of 24,200 MT were down 47% from the previous week and 53% from the prior 4-week average. The destinations were primarily to Haiti (13,200 MT), Mexico (3,300 MT), Canada (3,300 MT), South Korea (2,200 MT), and Honduras (1,000 MT).