Although there are a few cash bids surfacing, the cash market is still considered extremely quiet. Because the bids that are surfacing vary significantly, it appears that mills are offering more for price discovery purposes than for actual demand.
Rainfall throughout much of the delta proved relentless this week as did cooler temperatures and windier conditions. For these reasons, crop growth has drastically slowed. In addition to potentially lower yields brought on by cooler temperatures and wind, many growers believe that even the later planted rice may fail and not be brought to full production. This could ultimately make the projected small crop even smaller.
Last week, the futures market appeared to be establishing some sort of a downward trend as prices ebbed lower and both open interest and volume were up. This week, however, the market reacted to the negative weather by forming a temporary, albeit sharp, reversal as the nearby contract gained over $1 per cwt against last week. Because open interest and volume are both decidedly down and prices are up, the market will likely remain inflated until the shorts get covered. Once that happens, rough rice contracts are probable to drive lower again.
In Asia, ongoing container shortages and excessive shipping rates have subdued trade to some degree this week, which ultimately drove prices lower in several key exporting countries. India’s total rice export value is nearly twice what it was a year ago on account of rock bottom pricing and a strong appetite in Africa. African importers have recently signaled a slowing of demand until freight rates can normalize which may leave India with additional product to sell. Despite this development, most traders don’t suspect Indian exporters to suppress prices any further in the immediate future.
Next week, the USDA will release its stocks report, showing rice in all positions as of June 1st. In addition to the stocks report, the USDA will also release its updated June acre report. Although California’s acres will be heavily reduced from the initial estimate, the impact on the market will be minimal since the industry has already reached a consensus on planted area. For long-grain however, the industry is hopeful that the USDA will shave their projection, bringing it more in line with reality.