Following months of dismal news where the situation has been all but static, the rice industry finally has some real influx of information to digest. Domestic cash pricing has seen some marginal increases over the past week. Even though the prices were only increased incrementally, the psychological impact of a boost in prices after months of impasse was enough to generate some sales.
Significant volumes of rice were traded over the past week as growers look to take advantage of the market and clear out the last lots of inventory. The Asian prices also saw a moderate appreciation in value. As the indicative exchange rates did not have significant levels of volatility over the week, the changes were largely attributable to market forces.
A further indication that something is moving in the offshore market comes from the export sales report. The reported volume of 109,100 MT for the week was up significantly from last week’s values and is also well above benchmark levels for healthy sales. The renewed buying interest from overseas goes down in the positive column for the domestic rice industry.
Vessel loadings were also respectable for the week as the trade continues to load against prior sales. Export tonnage could realistically be expected to stay strong in the next few report in order to maintain a constant flow against these old contracts.
In other reports, the World Market Price Estimate was held constant for the week halting (at least for the moment) the downward trend from the previous two reports. This perceived firming of the market tends to correlate well with the indications that the industry is sending.
In the futures market, the board performed well this week in response to the various market indicators. All the open contracts on the board posted notable gains. More significant was the pattern through which the gains were made, as the market trended steadily upward with no major retracements.
Two other notable reports were issued this week: the annual Prospective Planting Report and the quarterly Rice Stocks report.
The planting report was not surprising in direction for rice acreage but rather provided a confirmation for what most in the industry already suspected – that acreage would take a significant reduction. According to the report, national long grain acres are expected to be down by 22% from 2016 for a total estimated acreage of 1.909 million acres. Total rice acreage for all classes is projected to be at 2.626 million acres and a 17% decrease from last year.
Evaluation of the estimate suggests that the planted acres for 2017 will look much like they did in 2015 in many respects. The reduction in area is necessary from a marketing standpoint as the looming carryover stocks will be a negative factor in the pricing equation until it can be dealt with.
The remaining report that was influential was the Rice Stocks report which indicated that all rice stocks in all positions on March 1 was slightly lower than the same report in 2016. This is noteworthy in that it suggests that much of the carryover that has been badgering the market for the past few months may well be further reduced than was previously thought.
When compared against the massive stocks reported on the World Agricultural Supply and Demand Estimates (WASDE), this volume is a much more manageable value.
With the plethora of information that has entered the market this week, there are a few comments that can now safely be made. First, with the new “official” information, the April WASDE SHOULD experience some significant revisions for rice. These revisions should also be more bullish than has been seen on the past few reports.
Second, with the proposed reduction in acreage and the resultant supply in 2017, there is a possibility that some price appreciation may be in the works later in the year.
Finally, while it is not proper to suggest that the industry has passed the nadir of its trials, the way forward looks brighter now than it has for some time.