There still appears to be buyers of old crop seeking immediate delivery, but they continue to struggle to secure the inventory. It looks like the best cash price at the moment is found in Arkansas where even July futures are being floated. As for new crop, the market is still relatively opaque as both buyers and sellers are slow to converge. The cash market throughout the delta is considered flat from the prior week.
After last week’s export sales report which contained a net reduction to the new sales line item, this week’s report boasted 14,800 MT of new sales. Haiti was the key contributor to the rebound, more than offsetting a reduction to Mexico which appears will be rolled over to new crop. While this is still down from the 4-week average, it is certainly more positive news than what was reported last week.
Net Sales spiked 29% against last week, and were recorded at 63,700 MT. In fact, this week’s shipments were up 16% from the 4-week average. The largest destinations were almost split between Calrose and long grain as the main destinations for Calrose were Japan and South Korea, while long grain went to Honduras.
Looking at new crop, with the exception of Missouri where the rice emerged trails the 5-year average by 7%, the other states are all within range of their averages. It’s not entirely uncommon for early harvested rice to command a premium, and with the tight supplies from the 2019 crop and the later 2020 plant, this year’s premium may be extraordinary. The one caveat to this theory is the additional 30 million cwts of long grain expected to be harvested this fall; the extra production should alleviate some pressure shortly after harvest commences, most likely making the premium a relatively short-lived anomaly. However, weather and increased demand from traditional buyers in Mexico and Central America along with such destinations as Iraq can certainly alter the situation. Until this crop is harvested, dried and in the bins there are no guarantees.
In Mexico, government officials continue to assess consumer prices and apparently are not leaning towards opening a new duty free quota from Asia or other origins at least for the time being. The effects of COVID-19 on the market continue to cause a higher than normal consumption of rice throughout the Western Hemisphere. We are still looking for that crystal ball.
Export prices out of Asia traded sideways this week as Vietnam and Pakistan prices retreated $10 per ton while the origins were flat to slightly up. As the region remains hamstrung with labor constrictions and logistical issues, both new sales and shipments have become increasingly difficult. This is especially the case where inland trucking costs have risen significantly, and migrant laborers left in droves to return to their home states. Fortunately, the situation does appear to be improving and the trade expects strong shipments during the second half of 2020.
In the futures market, volatility is ongoing, which can be clearly seen in the nearby contract which has shed another $1.50 over the past 7-days. Open interest has steadily declined since last week, unlike volume which saw a wider range of activity. There may very well be more volatility ahead as the July contracts seek convergence with the September contracts. New crop contracts all saw minor gains against last week.