Market Update: A Year Like No Other Continues

On the ground, all seems to be going as planned now that planting has wrapped up in each state. Sure, there is plenty of consternation about inflamed input costs and where the rice will be marketed once it’s put in the barn, but for now rice is emerging on schedule. The biggest concern is the price of diesel, and possibility for another shortage based on a forecasted heavy hurricane season. Refineries are already dealing with chokepoints from previous shutdowns from hurricanes, and further weather-driven phenomena will only exacerbate the problem of fuel price volatility. The summer milling schedules have set in, which means fewer hours and servicing primarily core domestic customers. This week did notch the marketing-year low for export sales; this is a result of pricing as high as $500 pmt for U.S. LG 5%, which is 22% higher than Uruguay, 27% above Argentina, and 16% premium to Brazil. It’s no wonder our exports are dwindling.

Prices in Texas continue to lead the pack at $17/cwt. This has been relatively unchanged for weeks now. Louisiana is quoted at $16.67/cwt, while Mississippi, Arkansas, and Missouri are each quoted at $16.75/$17.50.

The RMTC sponsored by the USRPA held in Cancun last week revealed several key factors looking at trade in the Western Hemisphere. One of the most significant is the high price of U.S. rice when compared to other origins, and Mexico’s emergency order to cancel tariffs on many products—including rough rice—to battle inflation-driven food cost increases. Quality troubles from U.S. rice among other concerns have resulted in a slow but steady erosion in the Central American markets. While the U.S. used to enjoy nearly 100% market share in Central America, we now struggle to retain over 65% given current market constraints and dynamics. This is why the RMTC is such an excellent platform to openly discuss solutions and new opportunities in the Western Hemisphere.
In Asia, Thai prices are at $459 pmt, still well above Viet prices at $425. Only three weeks ago, these two origins were almost equal in pricing, but with Iraq coming in and building a strategic partnership with Thailand, that has put upward pressure on the price. Demand is steady in the Asian region, which would indicate pricing is firm to up. Reports of India possibly tapering, or even banning their rice exports, are unfounded and pure speculation based on their announcement of a wheat export ban. Prices in India are actually dropping amidst all of the other global food inflation. Only ten weeks ago, Indian rice was trading at $365 pmt, but current reports peg the price down to $350 pmt. 

As discussed above, the weekly USDA Export Sales report is dismal this week. Net sales of 7,600 MT for 2021/2022 notch a marketing-year low, down 63% from the previous week and 67% from the prior 4-week average. Exports of 24,600 MT were down 61% from the previous week and 38% from the prior 4-week average. The destinations were primarily to Colombia (14,300 MT), Jordan (4,300 MT), Canada (1,800 MT), Saudi Arabia (1,700 MT), and Mexico (1,200 MT).

Delta Farmers Planting Last Acres for 2022

We are finally caught up with planting in Arkansas—a welcome sign to all farmers, processors, and industry members. Despite the return to normal after poor weather that severely delayed planting, it will still be a victory to exceed 1 million acres of long and medium grain combined in the state. There is concern that the later planted rice will follow historical trends and yield slightly less than normal, but this is a tradeoff all are willing to accept given the other option of no rice at all. The core domestic business continues to be the primary driver looking forward for milled rice, as Iraq has found ample supplies in Asia and Haiti’s political disruptions prevent bookings and subsequent distribution to the Haitian people.

Although export demand for U.S. long grain rice is down only 2.6% year to date, it would be down roughly 10% if the Iraqi business didn’t materialize. In other words, exports to most other origins are off this year. As Brazil concludes harvest and looks to merchandise its rice, the U.S. can expect ongoing stiff competition in Mexico and Central America. Just this month, Mexico has declared an emergency because of the increasing food costs. As a result, the Mexican government announced the removal of most import duties on food supplies. This includes paddy rice of any origin for several CAFTA countries where tariffs are going to zero in order to suppress food inflation. This will further erode the U.S. market share because of our higher prices. In the case of Mexico, the duty free import measure for rice is only on rough rice and milled rice was not included in the new policy. These set of conditions will make for interesting discussions at the Rice Market & Technology Convention scheduled for May 31 - June 2 in Cancun, Mexico where more than 175 rice businesses have registered to attend.

The rice world is wrought with complications. Front and center are the disproportionate impacts of the fuel and fertilizer costs to rice vs. other crops like corn and beans. This problem is only exacerbated by the hamstrung wheat trade, courtesy of the Russia invasion. Most analysts expect the volatility to worsen as we move into the Fall. Water shortages in Pakistan are having a large impact on rice growing provinces, such as Punjab and Sindh, which will likely hinder output from this region. However, there is no sign that India will reduce their production or exports, further depressing export prices for rice worldwide.

In Myanmar, the government surprisingly decided to modify the rate of the kyat to the detriment of exporters. This forex restriction has ultimately made the country less competitive in the global market restricting them to border trade only. To make matters worse, Myanmar farmers cultivated fewer acres due to poorer economics; higher fuel costs, fertilizer, and chemical costs, not to mention credit issues, are all factors that have driven rice prices higher. 

In Thailand, prices have remained similar to last week around $445pmt, and they are home to Iraq’s purchases for the time being. Vietnam is cheaper, in the $415-$420pmt range, keeping busy fulfilling Filipino demand. With these prices from Thailand and Vietnam, one would think that India would be interested in raising prices; however, they remain at a discount of at least $65pmt in comparison. The subsidies given to farmers to produce the record quantities and the subsequent exports make it extremely difficult for other origins to be competitive.

The weekly USDA Export Sales report shows net sales of 13,100 MT this week, down 55% from the previous week and 57% from the prior 4-week average. Increases primarily for Canada (4,000 MT), Honduras (3,700 MT), Guatemala (3,000 MT), and Mexico (2,000 MT), were offset by reductions for Haiti (300 MT). Exports of 24,200 MT were down 47% from the previous week and 53% from the prior 4-week average. The destinations were primarily to Haiti (13,200 MT), Mexico (3,300 MT), Canada (3,300 MT), South Korea (2,200 MT), and Honduras (1,000 MT).