| Harvest is almost underway just as the June acreage report is released, providing early signals of market activity for the coming months. Most crop reports from our on-the-ground sources are coming in with an optimistic tone, and those who will be first in Louisiana are eager to take samples and get the harvesters moving. But first, let’s examine the June acreage report that the industry has been anticipating for weeks now. There are a few ways to break down the report, so we will start by looking at the total crop size increase over last year, and then we will look at the long grain and medium grain acres individually. On the whole, a total of 2.687 million acres of rice were planted this year, a 21% increase over last year’s 2.222 million planted acres. This increase is largely on account of a return of the California crop on the west coast, and a significant increase of acres in Arkansas. Looking directly at the long grain plantings, the report shows 1.991 million acres, up 10% from last year’s 1.802 million acres. Medium grain acres have the largest change, with a total of 663,000 acres, up a whopping 70%. Of the 663,000 acres of medium grain, 435,000 acres are in California (excluding short and long grain), while the balance of 228,000 acres comes from Arkansas (160k), Louisiana (60k), Missouri (5k), and Texas (3k). The story here continues to be one of convergence; for medium grain, it’s that the high-priced old crop must converge with lower new-crop pricing on account of increased supply. For long grain, it’s that U.S. price must converge with South American suppliers like Brazil, Paraguay, and Uruguay in order to restore balance in the Western Hemisphere rice export complex. While convergence may be a nice way to say “the price will drop this year,” it is essentially restoring the balance after climate-driven production shocks to both U.S. medium and long-grain rice severely distorted typical supply chains. This inherent climate risk is increasingly becoming a factor in the Western Hemisphere rice trade; i.e.: climate impacts now extend beyond the monsoon rains in India or weather catastrophes in Indonesia. Water, and lack thereof, is having a significant impact on crop decisions, crop availability, farm bill measures, and ultimately the reliability of supply. It is important to maintain perspective here and remember that the 1.9 million acres of long-grain rice, and the 663,000 acres of medium grain are simply a return to a normal U.S. crop. However, multi-year consecutive decreases in both long and medium grain supplies resulted in our export markets adjusting and finding supplies from our competitors. Having a full crop creates an opportunity to recapture these markets, but also a challenge to market at levels positive to the industry as a whole. On the ground, prices in Texas are reported at $17.50-$17.75/cwt. Louisiana is being reported at $19.75/cwt, and Mississippi, Arkansas, and Missouri are all $19-$18.50/cwt. In Asia, prices continue to firm this week with Thai prices now at $525 pmt, and Vietnamese rice at $510 pmt. |
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