The June WASDE report was released by the USDA this week, and there were some notably bullish factors to discuss. First, the carryover stocks of USDA’s number came in at 30.1 million cwts, 3 million cwt below the trade estimate of 33.1 million cwt. A similar revision took place last year as well at the June report, in which the USDA June WASDE number came in at 28.8 million cwt, which was 3 million cwt below the trade estimate of 31.8 cwt. This is a bullish factor that will highlight the short-crop situation the long grain industry is moving into this year. The 2021/22 all rice beginning stocks are reduced 2.0 million cwt to 40.9 million, due to a combination of lower imports and higher exports for 2020/21. All rice 2020/21 imports are lowered 1.0 million cwt to 34.7 million on reduced volumes from Asia in recent months. The 2021/22 all rice season-average farm price is unchanged at $14.20 per cwt, compared to $13.90 for 2020/21, which is also unchanged this month.
For medium grain, the USDA shaved 500,000 cwts from the balance sheet on reduced demand outside of the Northeast Asian region. Ultimately, the USDA will likely be forced to lower exports a little further once the actual acre situation comes to light. Although the USDA currently forecasts ending stocks to reach a 3-year high, no one in the medium-grain industry anticipates a similar outcome on account of the drought in California.
The market itself remains fairly dormant, with no new noteworthy milled business on the horizon. Mexico has been a steady paddy customer, but business from Iraq or Haiti is still the shot-in-the-arm the market needs to ignite any cash prices on the ground as well. Planting is essentially complete across all rice-producing states and is progressing as would be expected with the wet weather in Louisiana, and the dry weather in CA. As a whole, the industry is pegged at 75% in the Good to Excellent condition for rice, and only 25% in the Fair to Poor categories.
Export sales and shipments, reported this week ending June 3 showed weaker sales but larger exports. Sales of 29,500 MT were up 21 percent from the previous week, but down 36 percent from the prior 4-week average. Increases primarily for Haiti (15,200 MT), Mexico (6,400 MT), Honduras (5,100 MT), Canada (1,400 MT), and Belgium (400 MT), were offset by reductions for Costa Rica (100 MT). Exports of 65,400 MT were up 92 percent from the previous week and 27 percent from the prior 4-week average. The destinations were primarily to Mexico (25,200 MT), Costa Rica (17,400 MT), Haiti (15,700 MT), Japan (2,200 MT), and Canada (1,900 MT).
In Asia, it’s a similar story this week with Thai exports waning based on high freight rates and the Thai Bhat strengthening against the US Dollar. Viet prices are still higher than Thai prices though, and despite that disparity, is still capturing the lion’s share of the Philippine business. However, there is speculation that this may be changing as the purchasing arm for the Philippine government will be sourcing cheaper rice, which points directly to India. The Philippines is expected to be the world’s second-largest rice importer this year, falling in behind China who is once again, projected to be the largest. The FAO does project that both global rice production and utilization will reach new peaks in the coming year, as countries seek to become more self-sufficient as well as find ways to fill the demand for what appears to be insatiable Chinese demand.
Despite the bullish revisions to the long grain balance sheet, rice futures edged lower this week. The nearby contract lost more than $0.30 per cwt from the beginning of the week. Average open interest was up down 11% from last week while average volume was up 75%. Declining open interest with declining prices may suggest that the downtrend may continue longer or that the selling climax is right around the corner. Either way, the market can expect increased volatility in the days ahead.