Market Update: U.S. Rice Market in Wait & See Mode

June 9, 2023
After a successful RMTC in Mexico last week, the trade is buzzing with talk of price convergence in the Western Hemisphere, and in this case, convergence most likely means the U.S. price will have to fall to balance out the increased supply. With harvest wrapping up in South America, supplies are coming into focus, but there the big question hanging over the market is how competitive U.S. rice will be. The short crop and high prices in recent years has created space not only for increased trade from other suppliers in the Western Hemisphere but has left demand centers exposed to even cheaper rice from the Eastern Hemisphere origins like Vietnam, Thailand, and Pakistan. 
U.S. rice once set the global standard in quality and price, but in the last decade has fallen from that spot as India has taken the reigns as the world’s top exporter by a significant margin. India is expected to export at least 22 million metric tons this year, followed by Thailand with 8 million metric tons, Vietnam with 7 million metric tons, and the U.S. with approximately 2.35 million metric tons. This is a significant bump for the U.S. compared with last year, as it is an expected 21% increase year over year. The tough question that will have to be answered, though, is how the U.S. will compete when the current price for U.S. #2/4 is 29% higher than Thai and Viet prices, and nearly 40% above Indian prices. In the marketplace, farmers can expect the unexpected as the window between old crop and new crop emerges in the next few months. Lower overall harvest numbers in Mercosur, particularly in Brazil, and some questionable numbers with U.S. stocks and acreage will make the remainder of 2023 and into 2024 a real challenge for importing markets. And you can add climate disturbances in certain regions of the Western Hemisphere and Asia to further complicate the outlook.
We said it last week and will say it again this week: the “bad news” of falling milled rice prices in the U.S. is actually good news for the health of the industry, as clawing back markets and market share is of paramount importance this year with a return to more normal acreage. To drive the point home, paddy exports of long grain are down 43% YTD, brown rice long grain exports are down 61% YTD, and milled rice exports are down 7% YTD. 
Some silver lining here, however, is that the FAO rice price index hit its highest point in May at 127.8 points, up 2.9% from April on increased Indica prices, largely due to firming prices in Thailand and Vietnam. This provides support that the only way to achieve convergence isn’t just the U.S. price dropping, but price firming in the Eastern Hemisphere to help close the gap. In Asia, Thai prices are holding steady at $500pmt, as are Vietnamese prices, also hovering at the same price point on strong demand. India remains at $455pmt with strong government intervention.
The crop is progressing nicely, with emergence in full swing in all states. Now ratings are beginning to drop reporting 11% of the crop in excellent condition, 59% of the crop in good condition, 27% in fair condition, and only 3% in poor condition. This bodes well this early in the cycle, and field reports offer optimism for conditions thus far to be favorable for high milling yields, but it’s far too early to speak with any certainty.
The weekly USDA Export Sales report showed net sales of 11,400 MT, down 32% from the previous week, but unchanged from the prior 4-week average. Increases were primarily for Saudi Arabia (8,600 MT), Honduras (1,500 MT), and Canada (1,000 MT). Exports of 70,800 MT were up noticeably from the previous week and from the prior 4-week average. The destinations were primarily to Panama (29,600 MT), Honduras (17,100 MT), Haiti (10,000 MT), Saudi Arabia (9,200 MT), and Mexico (3,300 MT).w what we have in hand.
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