Despite being hamstrung by numerous weather obstacles this planting season, the South is in its final stages of planting. So far, Texas, Louisiana and California are all complete, with Arkansas and Missouri both hurrying to get their crop planted. Trailing behind its 5-year average by 6%, the USDA most recently reported Arkansas to be 90% complete and Missouri to be 83% finished. Even with the setbacks, it looks like acres should still be on par with the industry’s initial acre projections. This is mostly attributed to the firm undertone that the rice market is experiencing relative to other commodities.
Rice emerged in Arkansas was recorded at 81%, with 64% of the crop considered to be in good or excellent condition. Crop conditions in Louisiana and Texas are looking quite promising with the start to harvest just over a month away.
Old crop paddy is scarcely traded throughout the entire US as every state is dealing with tight supplies due to consistent demand throughout the marketing year, which was further exacerbated by the COVID panic buying. There are a few pockets of old crop surfacing in the upper delta which are commanding strong prices, but the sales are small and sporadic. As for new crop, rice sales started out at strong levels, and for early planted rice the market still commands a premium. In the lower delta, there doesn’t appear much liquidity at present as buyers and sellers diverge in price expectations.
This week the FAO Food Price Index (FFPI) was released, and it tracks international prices of the most commonly traded food commodities. The index averaged 162.5 points, down almost 2% from last month, marking one of the lowest levels since December 2018 as the world struggles thru the economic impacts of the COVID-19 outbreak. The FAO Cereal Price Index was also down as rice was basically the only major cereal to post month over month gains.
The futures market attracted significant interest this week as average daily volume rose by more than 200% this week. Ongoing buying pressure caused by market long looking to take deliveries pushed the July contract up 23% this week.
Export prices were relatively stable this week with Thai 100% only down slightly and Vietnam, Myanmar and other Asian origins all flat against last week. The export sales report this week indicated that new sales were up from last week, but still down 46% from the 4-week average. Meanwhile, shipments were on par with the 4-week average, and up from last week. These statistics have little shock factor in the marketplace since the industry already anticipates lower figures moving into new crop.
In Mexico this week, federal government officials continue to express concern for high consumer prices as they discuss the possibility of opening a duty-free quota from any origin. No decision has been made as of this writing as the country continues to battle the severe COVID-19 situation. Mexico is currently sourcing rice from Mercosur countries due to the market conditions in the U.S.
With regards to Mercosur, in Argentina, the COVID-19 has complicated the economic situation. Domestic demand is strong, estimated to be 30-40% higher than usual due to the alternatives of lower priced rice, pasta and potatoes. Exports have been mostly in containers to the EU as brown rice along with big sales to Chile as well as to Mexico and Peru. Brazil is struggling to control the virus with varied results, in the cities of Sao Paulo, Rio de Janeiro, Manaos and Fortaleza in particular. The market is at a standstill with the appreciation of the Real (5.1 per 1$US) lowering domestic prices or otherwise less competitive, paying $390/ton in Paraguay for milled rice ex-mill.
Uruguay is selling strongly everywhere it can. No Middle East sales so far to Iraq as the largest destinations are Panama, Mexico, EU, Peru, Turkey and numerous small sales of containers to Central America. A major concern is the lack of irrigation water for the new crop. Lack of significant rains have lowered water reservoirs levels, rivers are low and the threat of a dry winter could seriously damage planting intentions. Paraguay is still in trouble because of the low draft in major rivers making already difficult logistics even worse.