The rice market has continued to steadily progress through the summer doldrums with very little change in reality, but significant trepidation and uncertainty looming on the horizon for harvest.
The weekly export sales figures have been delayed for the week due to the U.S. Memorial Day holiday. There is very little volume left in first hands and as such, the reported sales are attributable to the merchandisers and resellers that are liquidating their inventories. Sale registrations should be expected to taper off for new crop as these stocks dwindle, leading into new crop.
Vessel loadings are similarly expected to surge and then fall off through July for the same reasons. Export sales have been strong of recent date, due to increased demand in overseas markets as well as a more advantageous USD exchange rate.
Exports should pick up the pace again in July/August as buyers look to cover near term shortfalls and will most likely stabilize into September when the main crop harvest begins.
Competitive Asian pricing has appreciated somewhat over the last report, with modest gains being noted in all benchmark origins. These price changes are a result of the changing exchange rate to some extent but is more reflexive of greater competition in the global marketplace in conjunction with an uncertain near-term supply situation due to the coronavirus in the region. As a consequence, USDA has raised its world market price estimate for the week for both classes of rice.
We understand the federal government (Economy, Agriculture departments) of Mexico are meeting with rice mills and producers with regards to concerns for consumer prices. Food security is a constant conversation among Mexican government officials, particularly the higher than normal consumer prices of $1.00 – $1.10 dollars per kilo. The current dollar-peso exchange is 22.80-23 pesos per dollar. This week’s meetings are to decide if Mexico will open their market to Asian milled rice with a duty-free quota. Mexico is the largest market for U.S. long grain rice.
Domestically, the rice crop in the South is largely on schedule with favorable weather to boot. Texas and Louisiana have seen sporadic heading across the region, while Mississippi is progressing at earlier stages. The Upper Delta is experiencing unfavorable rains and flooding, which has impeded the planting of the crop in that area. Some early accounts indicate that Arkansas has planted less than 80% of its intended acres to this point, and with the crop insurance deadlines looming this may cause a supply side reduction later in the year. Regardless, this later planted rice will likely not yield reductions at the least.
From a pricing standpoint, there has been minimal trading over the week in light of the aforementioned uncertainties. Texas has seen low volumes of new crop committed at $13.80 while Louisiana reports small but consistent sales near the $14.20/hundredweight delivered. Buyers in both regions have indicated lower pricing but sellers are entrenched at these higher levels. Even higher numbers are likely through the early part of harvest due to supply and demand constraints, although pricing should stabilize in the latter part of the harvest when these problems are minimized. No commitments of note are being reported from the Upper Delta at this time.
In the futures market, rice has reported a stronger performance for the week on stronger average volume and open interest. Gains for the week ranged from 2.3% – 5% on the open contracts. The old crop contracts continue to feel the buying pressure as market longs are seeking rice and deliveries. New crop contracts have been responding as well as the market seeks to ascertain when and if the upward pressure will mitigate.
As the month comes to a close there are several key reports (in addition to the weekly crop progress reports) that will be published in June that are worth watching. The first will be the WASDE report which will give a further glimpse into the new crop projections as well as a forecast regarding the export volume. June 30th will see the certified acres report from USDA which will catalogue the total acreage actually planted and certified across the country. Moving forward, this will take one variable out of the projection equation and as such is a very important report.