| The typical headlines this time of year focus on harvest, potential yields, and a crop outlook that is getting clearer by the day. However, the excitement continues to come from India as the reverberations of their export ban of non-basmati rice shakes its way to consumers. Even here in America, panic buying not seen since the food crisis of 2008 or toilet paper purchases in the pandemic has found its way to urban centers. As expected, an over-reaction was the first reaction, but it is our hope that cooler heads will prevail. It has been widely reported in the last week that India is responsible for 40% of the global rice trade, and therefore assumed the ban was all encompassing. While it’s true that India does account for 40% of global exports, their ban on white rice actually accounts for approximately 15% of the global rice trade. The policy change is significant by all standards, but the following numbers will help to break down the situation and hopefully quell the developing hysteria. India typically exports approx. 20 million metric tons of rice per year (40% of global rice trade). Of those exports: Basmati: 4-5 million metric tons (approx. 9% global rice trade) is still exportableParboiled: 7-8 million metric tons (approx. 15% global rice trade) is still exportableBrokens: 3-4 million tons (approx. 7% global rice trade) has seen tariff/ban since Q3 2022; ie: the market has already adjusted to not having this supply available.Impacted White Rice: 7-8 million metric tons, or approx. 15% of the global rice trade, is being taken off the market…unless the Indian government exercises its option to make G2G deals with other nations. A 15% reduction in global supply is an enormous shock to the rice trade, but it’s important to know we aren’t talking about a 40% reduction that is assumed based on headlines. The supply reduction has certainly found its way to Asian pricing, as Thai prices shot up nearly 10% this week, almost touching $600pmt, while Viet prices bumped only 4%, holding closer to $550 pmt. We expect these prices to continue firming as India’s primary customers in West Africa, Indonesia, and the Philippines scramble to secure supplies in the near term, all while competing against the steady business Thailand and Vietnam already possessed without India’s customers. All of this panic buying and scrambling for supplies in the far east is good for us in the Western Hemisphere. The large crop we are about to harvest is no secret, and inquiries are already being made as to availability and supplies. While many of these inquiries are rather obscure and may not have “legs,” the real test will be Iraq. Iraq honored its MOU with the U.S. last year but at the same time procured significantly more and cheaper supplies from Thailand to fill out their demand. With Thai prices skyrocketing, and many Thai buyers void of a U.S. relationship, a shift of supply from Thailand to the U.S. is a very rational pivot for Iraq. This is great news for the overall market to scoop up additional demand amid rising prices, but has the potential to further constrict paddy supply. This could therefore firm up paddy prices to an already strained South American market. With all the unknowns there is one thing for sure: this is lining up to be an exciting year for the U.S. crop and the global rice complex as a whole. Looking at the USDA Crop Progress report from July 24, we see that 73% of the Arkansas crop is in good to excellent condition, 100% of California is in good to excellent, 58% for Louisiana with 40% in fair, 75% good to excellent for Mississippi, 79% good to excellent for Missouri, and 85% good to excellent for Texas. Combines have been in the fields in both Texas and Louisiana for several days now and with a weather prediction of hot dry days ahead, the harvest will gain strength by the day. This paints an overall rosy picture for the ensuing harvest, with over 75% of the crop showing good to excellent. Where this optimistic crop analysis would have placed an ominous expectation on price only weeks ago without the development of India’s ban, the solid-looking large crop only bodes well for the entire U.S. rice complex .  |
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