The cash market continued to erode as prices in Arkansas moved $0.50 per cwt lower this week.  The story was similar in other states where lack of bids or demand led to prices softening.  Texas paddy held steady, but mainly because that market operates based on its own fundamentals, which at this point imply moderate demand and scarce supplies moving into planting.  As reported last week, higher prices are required in the immediate future to bolster long-grain acres, and that doesn’t appear to be happening.  As a result, we still expect to see substantial rice acres move into beans and corn this spring.  This is a market that has several factors indicating reasons for prices to move upward but also reasons to soften.  Mercosur harvest, quality issues, demand from Mexico, Central America, Venezuela, etc will continue to be monitored.  Rice farmers in South Louisiana and Texas are in the field as new crop planting is underway this week while farther north in the delta fields are in full preparation, weather permitting.

Total export demand for long-grain is down more than 11% year to date.  The importance of paddy exports cannot be overstated in a year such as this, and they have proven stable despite the current market conditions. Meanwhile, the elasticity of demand for milled prices has been highlighted this year, as milled rice demand has plummeted with US rice prices trading at a premium to other origins.  Between Iraq and Haiti alone, the US has seen a decline of 5.7 million cwts in long-grain demand (paddy basis) against last year.  Although there have been further talks of Washington working on an Iraqi deal that could translate into significant long-grain sales, the industry has demonstrated a lack of faith in seeing that come to fruition with the market showing little reaction to the rumors.  

This month’s WASDE report, published on March 9th contained virtually no changes from the previous month.  Historically speaking, the USDA isn’t in the habit of making remarkable changes to the balance sheet in mid-March, so this did not come as a surprise to the industry. However, following the March planting report and Rice Stocks report, which are both set to be released at the end of the month, we can expect to see more activity in the April WASDE.  Keeping in mind that long-grain stocks were up 18% year over year back in January, and that demand has only slowed since then, it is probable that the USDA will raise their ending stocks forecast for the 2020/21 marketing year in the next report.  It is also likely that there will be fewer reported acres and a lower carry out for the 2021/22 marketing year in their initial new crop analysis.

In Asia, prices backpedaled a few dollars per ton as the US dollar strengthened and Asian origins braced for the influx of freshly harvested supplies.   Not that the world rice market anticipates a shortage in 2020/21, but based on the most recent WASDE report, the USDA does expect to see the lowest carryout in 3 years. Asian exporters will find less competition from South American origins which battle drought conditions and as rice loses out to other more profitable crops.  Similarly, Asian exporters will also face less competition in the Middle Eastern markets from the US as growers opt to plant beans and corn to fill China’s ever-growing appetite.