Market Update: USDA Report Raises U.S. Imports a Record 42 Million Cwts

January 20, 2024
The steady market is a welcome respite from the supply shortage endured over the past two years. Mills are busy, as are paddy exporters, and it could almost be described as “perfect” if it weren’t for a milling yield that continues to put additional strain on the mills. There hasn’t been any expectation or reason to believe, but there’s still a sliver of hope that qualities might improve as we get deeper into the year, but no such luck. With that being said, demand is steady in both the export and domestic markets and cash bids are active. In Texas, prices on the ground are quoted at $18.75/cwt, while Louisiana is at $18.21/cwt. Prices in Mississippi, Arkansas, and Missouri are quoted at $17.25/cwt.
Prices in Asia continue to defy gravity on strong demand and no competition from India. It is still too early in the calendar year for buyers to weigh the Indian option against Thailand for Vietnam, so for the time being, they continue to benefit. India has found its way into the news again this week for its complete disregard for its WTO violations. The first citing comes in the form of India’s sustained urea demand. If the government was sincere about modernizing its agricultural systems and reducing subsidies, it would be reflected in reduced urea demand. However, India remained second to only China in its urea usage at nearly 35 million metric tons annually. Over the past four years, India has seen a stunning increase of 60 million agricultural workers. The second and most recent citing is India’s stubborn opposition to even addressing their rice and wheat subsidies until the WTO reaches a firm resolution on food grain stockholding. This is just another stall tactic India is using while its domestic policies increasingly have a distorting effect on the global rice trade.
The USDA WASDE report came out just after publishing last week, and the U.S. Rice Outlook this month calls for slightly higher supplies, lighter exports, and higher ending stocks with steady domestic use. The NASS Crop Production 2023 Summary estimated all rice at 218.3 million cwt, down 1.4 million cwt from previous estimates, but up nearly 60 million cwt from last year. All rice imports were raised 2 million cwt to a record 42 million cwt, with the increase coming in long grain fragrant varieties. Changing gears to the global outlook, the USDA calls for reduced supplies, consumption, trade, and ending stocks this month. The drop in supplies is from a weak Chinese harvest, no exports from India’s absence in the export market, and lowered stocks as a result of China.
Overall, the update points to what we have been mentioning for weeks, which is that the United States is positioned very well to take advantage of a tight supply in the Western Hemisphere. The harvest in Mercosur began in Paraguay 10-12 days ago and early reports are low yields due to widespread flooding. Heavy rainfall throughout northern Argentina, Uruguay and areas of Rio Grande do Sul, Brazil are causing many to predict mediocre field yields. Weather in February and March will be key. So until then, we anticipate the market to remain firm with paddy and milled export sales continuing to race forward. It should be noted that the Panama Canal condition is detrimental to U.S. exports to Central America. Only Honduras has an Atlantic port. Drought conditions have the canal 30 percent lower than expected and have reduced the number of vessels. Passage is given through an auction process, meaning the highest bid gives you canal access.  
The USDA Export Sales report shows net sales of 110,000 MT this week, up noticeably from the previous week and up a whopping 85% from the prior 4-week average. Increases primarily for Mexico (25,800 MT), Venezuela (22,000 MT), Guatemala (16,400 MT), Japan (15,900 MT), and Saudi Arabia (10,200 MT). Exports of 89,000 MT were up 86% from the previous week and 15% from the prior 4-week average. The destinations were primarily Mexico (33,000 MT), Honduras (15,300 MT), Japan (15,300 MT), Saudi Arabia (9,300 MT), and Haiti (9,300 MT). The numbers are astounding when compared to last year—it’s great to have supply to export!
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