Rice Update: Firm Market Brings Optimism to Farmers

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The rice market continues to be quiet but upbeat as the market continues to digest the recent positive news of the Iraqi purchase. 

Export sales were reported as “off” from the previous reports tonnage, however the current levels are still respectable. Continued buying at these volumes will be critical in keeping the market moving into the new year. Also, a possible additional purchase of U.S. rice from Iraq is tantalizingly close and if realized, would be a much welcomed Christmas present for the U.S. rice market.

Vessel loadings were also decreased from the last report but should adjust to the upside in the next week or two.

Asian pricing was generally sideways over the week. No significant supply or demand factors have entered the market to move those price points and as such are expected to remain stable for the near term at least.

Domestic cash bids have also been generally sideways, although the potential upside to the market seems to have a bit more credibility with the advent of new business. This is particularly visible in those areas that work off of basis bids against an underlying futures contract.

The futures market has had another generally positive week through the end of Thursday’s trading. Even after Friday’s blow off to the downside, the market still posted only minor losses. An argument can be made that the upward action can yet be renewed, and next week’s trading will provide more insight into the probability of this happening.

As if to underscore the general optimism, USDA has increased its weekly world market price estimate for both classes of rice. Even though the gains have been moderate in all market sectors, they are still positive moves at a time when the rice market goes dormant for the holiday season. 

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Again, the biggest boost that may come through the works between now and the end of Q1 2018 is the possibility of additional Iraqi business. With the rice stocks in the MERCOSUR region being lower than normal, the resulting supply imbalance may tip the scales just enough to encourage additional purchases of U.S. origin. This remains a possibility until the new crop harvest in that region is able to enter the supply chain in late February or early March.

If this indeed does come to pass, even if the overall volume is less than 90,000 MT, it would have a tremendous positive impact on the domestic cash pricing in the U.S. marketplace.

Full report.

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