The rice market has continued to thrive under the current conditions, although many growers in farm country are not able to say the same. Weather is still the underlying force influencing the market at this time but in some areas it seems as though fundamental supply and demand factors are beginning to play a larger role.
The export sales volume for the week was nominally higher than last week’s numbers. With values near 50,000 MT, this does not lend credibility to the notion of a strengthening overseas market. In fact, with the concerns that Mexico is having regarding the sourcing of raw commodities, these numbers only underscore the importance of generating even more offshore business.
There is still time for the export numbers to turn around and maintain the estimate pace for the year but stronger and more consistent sales will be required for this to happen.
Vessel tonnage also saw a notable increase over the previous report. The old business on the books that has been waiting to ship has finally begun to move. This movement is a positive thing but as the old sales are only now moving to the final destination, it is very possible that the buyers will have an even longer window before they have to re-enter the marketplace. Price and trend will play a very large factor in purchasing as well.
Old crop pricing at the farm level has been fairly constant over the past few weeks in part because most of the old crop is out of first hands at this time. That which remains is undoubtedly watching both the futures market and the cash basis climb and pricing intentions have risen accordingly. As cash pricing remains generally unchanged, the benchmark Asian prices have continued to rise.
All of the price indications have noted significant appreciation since the last report. A quick look at the currency exchange rates show that the minor fluctuations are not nearly large enough to influence the pricing in the Eastern Sphere this significantly. The result is that supply and demand factors are playing a larger role in this market as well.
As competitor pricing increases with domestic pricing remaining relatively stable, the spread between U.S. FOB pricing and other origins is decreasing. The smaller spread will ultimately lead to a more competitive sourcing of rice from the U.S. which should help with the export issues.
To underscore these factors, USDA again increased its world market price, this week by almost 4%. In light of global events, this marks the second week in a row that USDA has increased its estimate. Judging from the near term performance, the futures market seems to agree with the Federal prognosis.
Trading for the week was up and down across all of the open contracts but by the end of Friday’s session, the market posted solid gains yet again. The weather factors are beginning to become less influential and the realities of the flooding and production losses are becoming more known. With many acres having been destroyed and many more being unable to plant, the 2017 balance sheet will definitely have some significant revisions in the coming weeks.