Market Update: Rice Farmers Cautiously Optimistic as Harvest Gains Strength

August 11, 2023
The saga continues in the international space, where new rumors are surfacing that India may now repeal their weeks-old white rice export ban. The market reaction to the ban has been severe, sending prices skyward and traders scrambling to fulfill booked contracts, and ink new ones, all while trying to price in the reality that this spike is still based on the potential loss from adverse weather conditions. The Indian government has received pressure from both the Food and Agriculture Organization (FAO) and the International Monetary Fund (IMF) to repeal the export ban because of the havoc it has wreaked on global rice prices. A news report this week emanating from on-the-ground sources also indicates that the adverse weather conditions that India cited as the cause for the ban have abated, offering more support to relax the ban. It is far too soon to offer concrete dates, but December is likely the soonest any change is to occur. It’s unknown if the Indian government will retain a 20% export tariff on non-basmati and non-parboiled rice. Therefore, the next three months— the heart of the U.S. crop harvest —will be volatile, but the U.S. will come through smelling like a rose with excess exportable supplies for the first time in years. Keep your fingers crossed!
The crop continues to look good with 71% showing of the U.S. complex showing good to excellent, which is right on par with last year. Notably, Louisiana is showing 41% in fair condition, followed by Mississippi with 33% fair. Arkansas has only 8% in poor or very poor conditions. 74% of the crop is headed, just in front of last year’s pace by 3%. Arkansas is significantly ahead of last year, 74% compared to 54%, as is Missouri, which this year registers 70% compared to last year’s 47%. California is significantly behind last year, 45% compared to 69%.
And turning now to harvest, Louisiana is racing ahead with 44% harvested as of August 6, and Texas showing 23%. No other states have started yet but the hot weather is quickly maturing the crop. Some Arkansas farmers have started draining fields even in the northern part of that state. Early test results out of Texas and south Louisiana where the harvest is in full swing are showing a very inconsistent percentage of whole grains that most are blaming on the intense heat during the growing season. It’s still early and to date, Texas’ offices have yet to conduct any open public sales of farmer lots.
New crop pricing has been opaque at best, but with harvest underway and prices from Thailand and Vietnam skyrocketing, the spread between U.S. rice and far-east competition is diminishing at an alarming rate. The assumption pre-India ban has been that convergence meant that U.S. long prices would drop; however, that is quickly changing as Thai prices are now approaching $650 pmt, and Viet prices at $625 pmt. The U.S. long grain price has held steady at $760 pmt for months because of no supply, meaning in the last three months, the spread has shrunk from 35% down to only 15%. To be clear, U.S. prices have not reacted to the Indian news and have been holding steady, as have those in South America. That could change in the near term as the crop comes off and supplies become available but has not happened yet. Today's USDA Supply/Demand Report will supply the next major news and is scheduled for release at 12:05 ET.
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