Rice Market Buoyed In U.S. By Big Iraqi Purchase
Luckily, the government of Iraq was not shut down, and for the first time since 2010, US rice was sold to the Grain Board this week. A total of 40,000 metric tons was confirmed, along with 60,000 metric tons from South America for shipment by Dec 20.
The news that the Grain Board of Iraq purchased rice only from the Western Hemisphere, and specifically from the US, was exactly what was needed to put a heart beat back in our market. ADM did 40,000 metric tons, with Uruguay and Argentine joint selling consortia each doing 30,000 tons.
This is a bit smaller than Iraq’s usual monthly purchase of 120,000 tons, but it an excellent sign that quality is in demand, and that at least one buyer will pay a premium for quality. We believe that the US rice was sold at a $10.00 per ton premium to the South American, and at least a $200 per ton premium to current levels in Thailand or Vietnam.
When reports of the sale surfaced in Chicago, the futures market went on a two day move higher, ending the week 24.5 cents better than the close last Friday.
Due to the government shutdown, there was no export sales and shipment report this week. Export sales have been slow, but sales to Mexico, Central America and Haiti are in the works, and there are increasing inquiries even for medium grain.
Also of positive note, Colombia concluded its recent sale of import quota (17,555 metric tons) under the US-Colombia Free Trade Agreement. Clearly, some parts of the industry bet on lower rough rice prices during harvest, and basically that has not happened. Buyers who can wait have been waiting, and many mills have already purchased a lot of rice.
So until those domestic and foreign buyers are convinced that prices are not going lower, new sales will remain slow. However, time is not on the buyers’ side, and the Iraq purchase is, hopefully, the first signal of increased interest.
Brazilian rough rice and Vietnamese milled rice are both being offered in Mexico, but are not receiving much interest. The stories of the smoky odor permeating Brazilian rough rice are now widespread, and Mexican buyers are wary.
The Vietnamese rice that has been sold is being used for blenders, but the market niche for undermilled rice with extra damage and brokens is fairly small. But without a working government, we do not have the tally of officially reported new sales.
Prices in Asia have changed very little during the week, with Thai 100% Grade B closing out Friday unchanged at $425 per ton fob vessel and parboiled at $435 per ton. Vietnam’s 5% milled long grain is reported stronger at $390 per ton. Pakistan’s 5% milled held at $390 per ton, with its parboiled still at $430 per ton. Indian 5% long grain was called $425 per ton, with its parboiled now at $410 per ton, both up $5 for the week.
With decent volume and a continued growth in open interest, rice futures rose strongly on Wednesday but gave back some to close on Friday at $15.11-1/2 on the nearby Nov. This is 24-1/2 cents higher than last Friday, when it looked like the market would challenge the $14.50 level.
The strong price rise Wednesday erased the oversold condition of the market, but there is little follow through to the upside. We see the Nov futures stuck in the 52-week range of $14.69 – $16.65. In any case, if trading this market, keep a clear head and use sound money management. The export news has been supportive but the problems with huge Asian stocks remain like a wet blanket over this market.
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,