The ICE Dec and Mar contracts gave back 160 and 87 points on the week, respectively, as last week’s inversion between the two contracts gave way to partial carry. Well,
Rice Market Update: Prices Better Improve Soon or Planted Acres Will Keep Dropping
World Market Price factors took a bump up this week, as USDA increased long grain and medium/short grain by 7 cents each. This moved the on-farm WMP value of long grain up to $12.43. Prices in Asia, particularly Thailand, have been steady and firming in some countries, so this is not a surprise.
- Rice futures dipped early in the week, approached the lower Bollinger Band, and made a very nice bounce up – all on very low volume. As Friday came to a close, though, last minute selling dropped the nearby March futures to a 15.16 settlement, down 8 cents on the day and 6 cents on the week on volume of only 254 contracts for the day.
- We see nothing special about the technicals of this market, and the fundamentals are stronger than ever. As a result we expect to see some sort of fairly strong rally at some point in the rice futures. Why someone keeps blunting their advance and just who it is continues to be a mystery to us. We will just have to let this play out and see if the strong cash demand eventually spills over into the futures, as we have been expecting. Use care if trading rice or any other futures contracts. These are strange markets, and even though the volatility is historically low right now, that can change in an instant.
- In other markets, the Dow was at 13649.70; the Euro was at 1.3325 against the Dollar; and nearby crude futures were at 96.25 per bbl. Grains and cotton ended Monday with Mar corn at 7.27-1/2, Mar beans at 14.29-1/4, Mar wheat at 7.91-1/4, and Mar cotton at 78.55.
- Net export sales for the week totaled 45,600 tons. We see this as the market taking a breather around the holidays, and we know there is a good bit of export business already done that has not been reported. We suspect there will be a fairly good pickup in sales in the next two to three weeks.
- This week posted 8,000 tons of long grain rough sold to Mexico and Honduras. Long grain milled and brown registrations were 18,300 tons, where Haiti was the big buyer at 14,800 tons. Guinea-Conakry, Canada, Saudi Arabia (parboiled), Costa Rica, and the Bahamas all took long grain milled as well.
- Medium/short milled and brown came in at 19,300 tons, with good purchase being made by South Korea, Turkey, Israel, Mexico, and Taiwan. Higher sales will be seen as 2013 gets along a little further, but this was not a bad week for the rice business.
- Exports for the week were light at 28,500 tons, but the pace of shipments for this entire marketing year so far has been outstanding. We need to note, too, that last week’s liftings were over 104,000 tons. Long grain rough moved 2,900 tons, all to Mexico. Long grain milled and brown shipped out 3,200 tons mostly to Canada, Mexico, and Saudi Arabia (parboiled). Medium/short milled and brown loaded out 22,500 tons, with the big hitter being Japan with 14,200 tons of milled. South Korea, Canada, and Jordan also took milled, and Japan took a parcel of brown as did South Korea.
Texas and Louisiana
- Texas saw another uptick in prices this week, as 55,703 cwts were put up on public sale. Bids were $9.50 per cwt premium over loan for conventional varieties and $9.25 over for hybrids. Only 17,500 cwts confirmed, and that was mostly hybrids and off grade lots. It looks like there are less than 1 million cwts left in first hands in Texas, and those are strong hands. A green contract has been put out for new crop Presidio and Cheniere at a premium of $6.00 over a base price of $7.70 plus and escalator of 100% of the average Texas market through December 31st. We have not seen any takers yet.
- The water situation continues to be a problem, with a decision by LCRA to withhold water from rice farmers again in the 2013/14 crop if a substantial amount of rain is not seen by March 1st. When prices moved to $25.00 per bbl in south Louisiana last week, we are told that a lot of rice sold. Bids remained at that level this week.
- After getting to some level of comfort on paddy supplies, one mill dropped back to $24.50 per bbl but went back up to $25.00 before the day was over. Another mill changed its bid from $25.00 per bbl across the board (conventional or hybrid) to a tiered bid of $25.00/$24.85/$24.60 for package/regular/hybrid varieties respectively.The better quality and better milling rice has been picked over fairly well, but prices look like they will remain strong right to the end. A number of folks in the trade on all sides believe that both Texas and south Louisiana will run out, most likely well before the new crop comes in.
- South Louisiana is looking for planting to begin in about 45 days, and it looks like the same amount of acres planted last year will produce rice again in the new crop.
The Delta: Arkansas/Mississippi
- The Delta region continues to report low bids, especially when compared to Texas and south Louisiana.
- We are told that bids in Mississippi are still at the $14.75 per cwt level delivered barge loading facility but that this price is not buying much, if any, rough rice. There is a strong belief that the mills have been buying a good bit of rice in the area at much better price levels, but it is difficult to confirm that. There have been reports of some selling at $15.15 to $15.20 levels per cwt delivered, but how much has moved at that level is unknown to us.
- The expectation of a big drop in rice acres is being countered by the hope that higher prices at some point will cause farmers to reconsider and cancel their soybean intentions. If this has a chance of happening, though, prices better improve a good bit and soon.
- Arkansas is in a similar situation but probably will not see the acreage cut (percentage wise) that Mississippi is expecting. Arkansas bids are reported between $6.40 and $6.50 per bu fob farm. Here again, we are told that these prices are not buying anything. River levels are reported to be good everywhere for rice, and we understand that a lot of ag products are being loaded out as fast as they can get them onto the barges. How much of this is rice moving we do not know.
- With the exception of Vietnam, the Asian export prices are holding fairly firm, as noted by the increase in WMP this week. Thai 100% Grade B long grain milled was quoted at $565 per ton fob vessel on Friday, but Thai parboiled was actually up $10 over last week at $585 per ton.
- We don’t know the reason for the big drop in Vietnam, but Viet 5% is down $25 per ton from last Friday at $395 per ton. Pakistani 5% long grain was called $420 per ton, but there is no quote on parboiled – supplies are too low. Both Indian 5% long grain milled and its parboiled were quoted at $425 per ton fob vessel.
- There is a lot of talk about the surpluses in Asian rice stocks, and no doubt a good bit is true. But we wonder just how severe the overage really is.