The growing season continues across the U.S. unabated even as weather patterns and market conditions shift from the previous weeks’ trends. In the export sales report this week, it was another net negative week, with sales reductions more than offsetting new sales registries, as was the case two weeks ago, while not terribly encouraging, it is not terribly surprising either. There is a dearth of rice left in the supply chain to sell, and until new crop harvest mitigates the shortfall, it is possible, if not likely, that further “negative” weeks will be seen.
Exports against old sales have continued apace with only modest decreases since the last report. Benchmark pricing in Asia has contracted ever so slightly from last week, largely on exchange rate related factors. Very little fundamental drivers are in play at this time in the Asian sphere as the market waits and watches to see what the global economy and the potential threat of a second COVID outbreak may bring. USDA responded to these elements by reducing their world market price estimate for the week for both classes of rice.
Domestically, very little has changed from a pricing standpoint with both buyers and sellers entrenched in their positions for new crop. Buyers anticipate a price retraction after new crop comes online while sellers insist that the first lots will be sold at a premium. Both positions are valid, but the ability of overseas suppliers to make up the gap will determine to what degree a fresh influx of supply will suppress the market.
Production-wise, the crop across the South looks very good as some growers suggest that this will be the best production in years. Despite struggling with weather concerns early season, the Upper Delta production is on track as well. As the harvest window nears, the first fields in Texas may see a combine as early as mid-July.
Futures action for the week has seen the nearby July contract continue to converge on the September as the spread has narrowed over the week. This is comforting for many traders as proof that the market is still behaving as it should. With the exception of the nearby contract, the remaining contracts on the board appreciated in price by around 1% from last week’s close. Both average daily volume and open interest were lower at the market close.
Next week sees the end of June and the advent of several important market components. The June certified acreage report will be released showing the actual FSA numbers. These figures will remove one of the estimated variables from the balance sheet in the July WASDE. Additionally, the July futures contract will be giving way to the September, marking the transition into a true “new crop” futures month as the nearby. Barring any unforeseen weather events, the marketing season will begin in earnest over the coming weeks.