Market Update: Unpredictable Rice Market Keeps Prices Firm

September 16, 2022

With the Indian tariff situation, a rail strike that is temporarily averted, and harvest in full swing, there is much to consider this week in the rice market. To follow convention, we’ll start first with a harvest update, where Arkansas is at 24% harvested as of September 11, but slightly behind the five-year average of 33%. Mississippi is now right on track with historical norms, crossing the 50% threshold as of writing. Texas is all but complete, and Missouri and California are just getting underway this week.

Despite all of the flux in the news, the price has been relatively constant for milled and paddy prices in the U.S. In Arkansas, prices remain in the $16/$16.50 per cwt for hybrid and conventional respectively, and the same goes for Mississippi and Missouri as well. Texas still leads at $17.50/$18 per cwt, and Louisiana is holding firm at approximately $17.30/cwt. The export business continues to feed Haiti and Iraq, while domestic millings keep churning. Export prices have firmed slightly in recent weeks, perhaps on account of India’s tariff, or perhaps because of decreased supply overall; in either case, USA 5% was quoted at $710 pmt at the beginning of September, and is now closer to $720 pmt.

The problem is, if there is not a permanent solution with Union Pacific and the railroad, and a shut-down of rail cars does in fact ensue in the middle of harvest, the price won’t matter because it won’t get delivered, period. The impacts would be devastating, swift, and severe to the entire supply chain. Some reports state that the U.S. economy could lose as much as $2 billion/day as a result. We haven’t heard numbers like this since the “Ever Given” was lodged in the Suez canal when over $9 billion was lost globally for the six-day obstruction. The temporary agreement with the railroad is positive news in light of such potential disruption, but even a solution will contribute to increased costs in an already blazing inflationary market. The tentative agreement provides rail employees a 24% wage increase from 2020-2024, including a payout of $11,000 to happen immediately.  In the meantime, the availability of rail cars continues to be extremely scarce even to lease or purchase.

And now India; the world’s top exporter has completely banned the exports of brokens, which means China has been sourcing and will need to find a new supplier for their animal feed. As mentioned last week, basmati is excluded, and the 20% tariff will put the price much more in line with Vietnam and Thailand. Rumors of India’s current crop being as much as 10% off from last year’s record could also be a contributing factor. The bottom line for the US industry here is that USA long grain is already priced so much higher than Indian rice, the impact will be minimal.

The most recent Grain: World Markets and Trade report published by the USDA highlights that world rice production will decrease this month for the first time since 2015/16 because of decreased supplies in India (monsoon weakness), China (drought), and Pakistan (drought). With the population continuously on the rise, as expected, this production shock ripples down the line into decreased global stocks, hitting the lowest level since 2017/18. In the U.S., USDA is reporting the lowest rice production since the early 1990s, as long grain is down 8 million cwt to 132 million cwt, and medium grain is down 2.9 million cwt to 32.8 million cwt.

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