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Dossett On Rice: Not A Time To Be Bearish

Owen Taylor
By Markham Dossett, Talon Asset Management LLC March 17, 2017

Dossett On Rice: Not A Time To Be Bearish

©Debra L Ferguson Stock Images

Rice Cash Market:

  • India bids are staying very firm.
  • Strong demand continues from East Africa, Sri Lanka and Madagascar.
  • The Thailand market is quiet as they auction the ethanol-only, junk rice to the world market.
  • Vietnam is converting the lower Mekong Delta to jumbo shrimp farms because the salt water incursion inhibits rice production.
  • U.S. rice farmers are holding a little rice back, hoping for a price increase after the March 31 USDA Stocks and Planting Intentions report.
  • We have heard an estimate of 40% reduction in planted acreage in Arkansas alone and a 30% reduction in long grain acreage in the five southern states. USDA previewed a 22% long grain reduction in the Outlook Conference on February 24th.

Rice Futures Market:

  • May rice futures have been quiet, although they have moved up from the lows of the first week of March. Traders are focused on the outstanding U.S.-only rice tender from Iraq and the March 31 Planting Intentions report.
  • The Iraq tender should be announced as this report is published. If — and that is a BIG “if” – we were to sell 100,000 tons of milled, long grain on this tender, you might see rice futures get back up to the cost of production, which we assess to be around $10.00 cwt.
  • Iraq has not bought much rice from anyone for over six months so we are optimistic that we will get a good order soon.

The bottom line is that this is not a time to be bearish on rice. We have a possible major shift in supply, which may cause long hedgers to make a major shift in demand.

**Futures and options trading involve significant risk of loss and may not be suitable for everyone.

Markham B. Dossett was a Charter member of the New Orleans Commodity Exchange. He has traded rice since early 1981. He owns Talon Asset Management LLC where he hedges rice, soybeans, corn, wheat, cotton and cattle for producers in the South and Southwest.

Owen Taylor
By Markham Dossett, Talon Asset Management LLC March 17, 2017