|This time of year is when the market normally gets fired up and going. Harvest is all but complete, crop size and quality are relatively well known, and transactions are coming in hot and heavy. However, the low levels of the Mississippi River are wreaking havoc on all grain and barge shipments, putting pressure on prices and delivery schedules. The crop is in, but it’s having a difficult time moving out, and its impact is making waves across the entire supply chain. Last week we noted it was changing FOB pricing because barges can’t be loaded fully, therefore increasing the marginal cost of a ton of rice. CIF contracts are now having to be renegotiated because all prices previously booked were based on the assumption of a full barge. This is slowing the delivery schedule, in turn slowing demand for rice, which is making the spot market trading activity light at best. We hope this is a short-term problem, but there is nothing to be done about it except to hope for rain.|
The relatively static/sideways future market further confirms this marketing year is slow off the starting blocks. Increasing price to incentivize growers to sell physicals is difficult for the time being because the export sales aren’t there. Growers are also hesitant to decrease price to create sales, simply because even if the sales occur, there’s no guarantee of shipment because of the barge problem on the river. These problems aren’t impacting every rice mill or grower, but enough to put a damper on the broader market. We do expect the weather to alleviate the problem in the coming weeks and see an uptick in both exports and sales, but more precipitation is necessary for that.
We know that the harvest in South America will arrive in March 2024, so shipping all the rice we can before competition heats up is key to achieving a balanced market. We’re not hitting the panic-button by any means, but if we are still having barge-loading issues after Thanksgiving, some of these more obtuse problems could become more acute and have a direct impact on every level of the rice supply chain.In Asia, the anomaly of price divergence between Vietnam and Thailand is growing starker by the week. This does not happen on a regular basis, but this week yet again Thai prices dropped another $5pmt, now around $565pmt while Viet prices jumped nearly $10pmt up to $640pmt. A spread this significant is extremely rare; typically a difference of $30pmt is about as high as we see. The current market is trading at a difference of nearly $85pmt, largely due to Thailand’s new crop harvest coming available. With India still out of the picture, demand is forced to these two primary exporters, which could be setting up for significant price adjustments once India returns.
The weekly USDA Export Sales report shows excellent net sales of 93,500 MT, up 44% from the previous week and 78% from the prior 4-week average bolstered by sales to Mexico, Colombia, the Dominican Republic, and Haiti. Conversely, exports of 27,200 MT were down 61% from the previous week and 32% from the prior 4-week average.