Despite the tropical system that has settled over much of the rice growing region, the industry has stayed the course over the past week and continues the slow progression to new crop.
Export sales were significantly lower this week than the previous report, largely due to order reductions and cancellations. This week’s numbers were actually a net negative after several significant tonnages were taken off of the books. Hopefully, this represents a one off for the year and is not perpetuated with any frequency.
Vessel loadings were also down over the week. The limited quantity of old crop left in the system has made near term trading difficult as buyers are still trying to cover short term commitments until new crop is available. Asian benchmark pricing has appreciated over the week for similar reasons. The exchange rate matrix has been more favorable to US origins of recent date as the overseas competitors have narrowed the price gap and made domestic rice more competitive. As the global trade has tightened due to the coronavirus, USDA has raised its world market price estimate for the week.
Domestically, new crop pricing is becoming more aggressive although the price discovery process is still in its infancy. Cash prices for early shipment are notably stronger than the deferred months due to the immediacy of near-term demand. The trade still anticipates a large crop for the year which if realized will take some of the pressure off of the near-term commitments. Strong export demand for new crop is also keeping the pressure on the industry which will ultimately lead to more aggressive marketing strategies from producers as the year progresses.
Futures action for the week has also been an interesting study. After a strong run up to levels not seen in a decade or more, the nearby July contract finally broke to the downside and began to move toward convergence with the September contract. This contract has been an anomaly for some time as it has been characterized by lock limit moves on a daily basis, first as it appreciated into the $22 range, and then as it marched back into $14 territory toward the end of the week. The remaining contracts traded down as well with losses ranging from 0.46% to 5.24% respectively.
Much of the decline in the futures market came as a result of the monthly WASDE report released on Thursday. The report itself was net bearish for rice. On the supply side, beginning stocks were increased by 1.5 million hundredweights, while the imports figure was also increased by 1 million hundredweights which together increased the total supply figure by 2.5 million hundredweights. Demand side revisions included an increase in the domestic use figure (2 million hundredweights) which was partially offset by a 1 million hundredweight decrease in projected exports. The net impact of the revisions was an increase in ending stocks by 1.5 million hundredweights with no change in the projected 2020/21 average farm price at $12.90 per hundredweight.