|The Good: We are the only suppliers of long-grain rice in the Western Hemisphere through the balance of the year to a large degree. The Bad: We can’t ship comfortably because of the low draft on the Mississippi River. The Ugly: Crop quality and milling yields have certainly been a challenge in most areas.
Right now, it’s all about crop quality. Last week we discussed the macro-factors impacting rice trade both globally and right here at home through the lens of climate risk and El Niño. This week, the chatter is that the deeper the mills get into this crop, it’s becoming clear that the initial reports of milling yields in the low 50's weren’t a fluke. In fact, some places in Louisiana and Arkansas would be happy to see milling yields in the 50’s, as the high 40’s is unfortunately becoming the norm. It is difficult to quantify exactly what this means to total supply at this point, but the market is beginning to indicate, via an increase in futures price, that the large acreage won’t necessarily result in a commiserate supply of milled product.
The market has also spiked on marketing year highs from the export sales report. Net sales were reported at 207,900 metric tons, largely from huge purchases from Mexico, the WTO purchase from South Korea (medium grain), and a large sale to Senegal. Exports were down this week by 70% from last week, but those will rebound as we begin to ship against the aforementioned sales. We have been saying for weeks now that the U.S. is the only place to buy rice in the Western Hemisphere until spring, and we are finally beginning to see those procurements tally up. The problem remains, however, low draft levels at the Mississippi River and the ensuing logistical cost increase to deliver.
Nothing is easy north or south. Demand for long grain, both rough and milled, continues to be strong, and new players have entered the U.S. market as a result of conditions in the normally exporting South American countries that are virtually sold out of rice. New crop planting is not going smoothly in Brazil or Paraguay due to heavy rains and flooding in key areas blamed on the El Niño weather pattern. Rumors of Asian milled rice imports into Brazil are rampant and Paraguayan rice farmers and mills that have the 2024 crop in the ground are booking sales to Brazil, a clear indication of the market circumstances.
The low milling yields are prompting the industry to look to the scientific community to find answers to help overcome the poor milling quality this year. Many are at a loss as to what happened, and questions have been asked if it was climatological factors, cultural practices, planting dates, strange weather patterns, a mixture of varieties, or a myriad of other things or all of the above. As more data comes to light here, we will be reporting on it.
In Asia, the action continues to settle down a bit, with Viet prices holding steady for two weeks in a row in the $660 pmt range, while Thai prices are registering nearly $100 pmt below that price at $565 pmt. Again, a spread this significant between these two exporters almost never happens, but would appear to be par for the course for the way things are going this year. Things could change quite radically, however, as India is reporting that their stocks are nearly double their normal levels. With statistics like these entering the marketplace, it is a clear telegraph that the export ban will be lifted, and likely sooner than later now that domestic food security is shored up and election pressure is likely alleviated.
As we head into Thanksgiving week, there is much to be thankful for, as we have faced these challenges in prior years. So have rice with your turkey!