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Dossett on Rice: Bull Market; Hold Off on Hedging

Debra Ferguson
by Markham Dossett, Talon Asset Management, LLC, Waco, Texas July 3, 2017

Dossett on Rice: Bull Market; Hold Off on Hedging

©Debra L Ferguson Stock Photography

June 30, 2017

Rice Cash Market

  • India prices are weakening this week. There is still good demand from Bangladesh and East Africa but not as strong as last month.
  • India monsoon started on time but now is slowing its progress and causing some concerns.
  • Sri Lanka still has weather problems. They just bought another 100,000 tons. This will help India demand.
  • Thailand’s white rice 5% has dropped from $461 to $455 this week. Most other Thai grades have also dropped $5-8 this week. Still a strong market just a little easier.
  • On 30 July the Thai government announced a plan to stabilize rice prices as 24-26 million metric tons of paddy rice are harvested.

U.S. crop does not look good and weather problems early are now giving rise to insect and disease problems.

Continual rain from two tropical storms in SW Louisiana is not helping the production outlook. Arkansas and Louisiana got off to a bad start and are not getting better. Mississippi and Texas are fairing a little better but this is just not shaping up to be a great production year. The USDA Quarterly Stocks Report will be out on Friday 30 June. Most of the time the June report shows more of every grain when compared to the March report. Cash prices are better. Mexico demand remains very strong and weekly exports are very robust. The 77,000 tons that was reported this week is great for the end of the crop year.

Future Market

Rice prices at the CBOT are on a huge rally. It is great to be at a price where we can hedge a profit. However I would not hedge now as I think prices can go a lot higher. We started off with massive reduction in planted acreage. Then we lost a lot more acreage in Arkansas and SW Louisiana due to flooding and continual heavy rains. The big short trader who drove rice futures one dollar below cost of production and kept it there for about 9 months has disappeared. Today is FND and we had 998 deliveries against the July contract. The firm that usually clears trades for the two big Arkansas Co-ops has delivered 670 contracts. We are now in a bull market but we remain overbought. I am waiting for a correction to own September and November rice futures.

Debra Ferguson
by Markham Dossett, Talon Asset Management, LLC, Waco, Texas July 3, 2017