The rice industry continues to work its way through a complex maze of market and production factors this week as the market fundamentals seem to be firming up while the actual production estimates remain in limbo.
Overseas markets, specifically Asia, have seen some moderate price appreciation over the past week which reinforces the generally upward trend noted in weeks’ past. As usual, the currency markets have something to do with this phenomenon however the underlying strength in the demand (or weakness in supply) is definitely the more powerful driving force.
For U.S. rice, these stronger prices help to narrow the spread between the domestic and foreign sources and making U.S. rice more competitive in the global market. This increased level of competitiveness has yet to materialize significantly on the sales report however as the lackluster sales volume for the week demonstrates. As a gauge, the export sales report needs to show consistently higher volume than has been apparent in the last few reports.
Vessel loadings have stayed higher indicating that the old business on the books continues to move apace which is a positive factor as well. The world market price estimate was elevated again this week which contributes to the overall sense of a better market to come. Domestically, the cash markets have been generally sideways with variations almost exclusively due to futures market fluctuations.
The futures board has been mixed as well as the September contract exited the board and the November contract has become the nearby benchmark. Much of the volume over the week is attributable to position rolling. Most of the price fluctuation is a result of positioning, harvest pressure, and quantity concerns. Overall, the board closed notably lower than last week as all of these factors play out.
In farm country, growers along the Texas and Louisiana coast continue to grapple with the aftermath of the rain event that impacted the area in the last few weeks. Reports are varied as to damage and each region seems to have been impacted in different ways. The eastern portions of Texas and western Louisiana have seen more significant infrastructure losses in addition to second crop damage as compared to the western part of Texas.
The early report suggests anywhere between 20% and 100% of the second crop in the various areas have been destroyed (depending on the specific area). This could represent as much as 30% of some producer’s total production. Early economic models indicate that these losses could be in excess of $100 million dollars to the industry.
The harvest in Arkansas and Mississippi is in the final throes as most of the rice is in. Field yields are being considered acceptable if not remarkable, while milling out-turns are noted as ok but not great. On balance this will be a smaller crop than in past years and the quality is expected to be above average across the board.
Given all of the factors that are immediately apparent, there is a very strong case to be made for a better price scenario to producers as the year progresses.