This month’s Supply/Demand Report from USDA was very little different from November, with only two changes in the long grain figures and no changes in the medium/short grain projections.
Long grain imports were lowered by 1 million cwts, and this translated into a decrease of the same amount in the long grain ending stocks – now projected by USDA at 17.4 million cwts.
We think this will be much, much lower – unless exports just come to a dead halt. The other long grain change was an increase of 30 cents on each end of the average on-farm price up to $14.80 – $15.80. These are more reasonable estimates, in our opinion, especially on the higher end.
USDA raised WMP factors this week by 20 cents on both long grain rough and medium/short grain rough, which moved the on-farm WMP value of long grain rough up to $12.03 per cwt.
The weekly export sales report showed a disappointing 12,900 tons. This could have been due to things other than just weak sales: timing of reports, weather holding up barges, early holidays, etc.
In any case, we will have to see what the next few weeks show us – into January. Less than a thousand tons of long grain paddy were posted, and long grain milled sales were only 4,800 tons headed mostly to Mexico, the United Kingdom, and Canada. Medium/short rough and brown each posted 100 tons, and medium/short milled showed 7,300 tons sold, primarily to Turkey, Lebanon, Canada, and Japan.
Physical exports for the week were on track at a solid 63,600 tons, of which 36,800 tons were long grain rough shipped to Mexico (21,400 tons), Costa Rica (12,300 tons), and Honduras (3,200 tons). Long grain milled shipments were light at 2,800 tons mostly to Mexico and Canada. Medium/short grain milled and rough shipments totaled 23,800 tons, with Japan loading out 12,500 tons, followed by Jordan and 4,900 tons, south Korea with 2,900 tons, and Canada with 1,400 tons; Turkey also shipped out 300 tons of rough. Shipments may well slow down during the Christmas holidays.
Asian prices seem to have a stronger tone, but they are really still just drifting in the same ranges we’ve seen for several weeks now. Thai 100% Grade B closed the week at $405 per ton fob vessel, and Thai parboiled was at $455 per ton. Viet 5% long grain milled was reported at $425 per ton – fairly firm actually. Pakistan’s 5% milled long grain was noted at $385 per ton, with Pakistani parboiled priced at $430 per ton. Indian 5% long grain milled was called $410 per ton, while parboiled was at $400 per ton.
It was another sideways week for rice futures, with the nearby Jan contract closing at 15.545 – unchanged from last Friday’s settlement, but up 8.5 cents on the day. It has looked to us like the nearby market should (and it certainly still could) fall into the area of 15.20 in order to attract some commercial buying, but it just doesn’t seem to get the downward follow-through to go lower.
It may be that some commercials are getting ahead of the market for next year. We would not be surprised to see a drop in the nearby into the low $15 range, but, at the same time, we would be only slightly surprised to see it go back up from here. The chart signals are mixed, and with “holiday trading” getting ready to set in, anything can happen.
Volume has been low but not unreasonably so, and open interest has dropped off considerably – now at 7,637 as of Thursday’s close. Low open interest is generally a bearish sign, but that will probably not be the case this time.
We think prices will have to go back into the $16 range before this crop year is all said and done. We urge caution and care if trading rice or any other futures contracts.
We continue to believe that this year’s long grain crop will prove to be a very, very tight one, and this will manifest itself well before any new crop is even close to harvesting.