Market Update: USDA WASDE Report Lowers Carryover Stocks

October 13, 2023
The USDA’s WASDE was published this week, sending a bullish signal into the U.S. rice world by dropping carryover by 1.3 million cwt, or 5%. Last month’s report called for 24.1 million cwt of carryover, while this month it calls for only 22.8 million cwt on increased exports. The new crop export forecast was raised by 1 million cwt to 86 million for long grain rice because of strong early sales to Mexico, Central America, and Iraq. Also of note is a decrease of 14 pounds/acre in the forecast yield for the U.S. rice harvest; we will know more about the field and milling yields within the month.
The global outlook from the WASDE is sideways, calling for increased supplies, consumption, and trade right in line with last month. Ending stocks on a global scale are largely unchanged, resting at 167.5 million tons, which remains the lowest level in six years.

The October FAO rice price index reported an average of 141.7 points for September, a drop of 0.5% from August, though still 25% higher than this time last year. This slight decline came from Japonica and Aromatic prices, where full crops in California and the southern U.S., along with strong supply from Australia resulted in medium grain indexes dropping 11%. On the broader long grain market, however, those prices through September sustained their post-Indian export ban pricing with Vietnam and Thailand both sourcing rice for prices in excess of $600 pmt. We expect to see the FAO index drop significantly in next months’ report, as the broader Indica market has settled down, and is currently trading now below $600 pmt.

On a calendar year, it is nice to see that Iraq is helping to pick up the slack from exports to Haiti, Mexico, and Japan. Our top export market through July is Haiti with 208 MT, followed by Mexico at 184 MT and Japan with 158 MT. Last year through the same period, Mexico was on top with 352 MT, then Haiti with 264 MT, and Japan with 205 MT. The difference maker is that Iraq has 132 MT this year, whereas they had zero last year. A strong harvest and resulting supply will help the export figures bounce back to these key markets, as well as to some of our smaller markets in the coming months. With Mercosur largely out of the market until the new harvest, paddy importers are focused on the U.S. supply. Over the past few weeks, the US Rice Producers Association has hosted buyers visits from Ecuador, Mexico, Guatemala, Nicaragua, and Guyana while numerous others in the Western Hemisphere have inquired about the U.S. crop. The low level of the Mississippi River is a concern that has the attention of export merchants and buyers.
South Louisiana Rail Facility continues an active export season with the loading of the above vessel destined for Mexico with 25,000 tons of rough rice.

In Asia, another tender from BULOG, Indonesia’s rice purchasing arm, has kept Viet and Thai markets rolling. At the start of the year, Indonesia was expected to procure no more than 2 MMT. But as the bans in India unfolded and climate risk shined a light on food security, the country has taken major steps and is expected to amass nearly 4 MMT of rice this year, fully doubling the originally anticipated purchases. While this is all rice that will come from the Far East, it keeps pressure on already high global prices and helps to buoy prices in the Western Hemisphere. On the back of BULOG’s announcement to procure more rice, Viet prices jumped back up to $615 pmt, nearly $35 pmt over Thai prices, currently at $585 pmt. The one wild card that could come to fruition is a G2G deal between India and Indonesia, which could soften prices out of Vietnam and the entire complex. If we see that happen, it could be the prelude to a relaxing or complete removal of the export ban.
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