The rice industry is beginning to see movement again as events and news from the week are being digested and acted upon by the market. The export sales report released this week showed a dramatic decrease in sales volume (a current marketing year low) and a significant increase in vessel loadings (a marketing year high). These numbers, while not particularly positive are also not particularly surprising.
- After several weeks of very strong buying, overseas demand seems to have been sated temporarily and should pick back up after a few cool down cycles. Similarly, sales already on the books are beginning to ship aggressively. The overall volume of sold but unshipped rice would indicate that higher levels of loaded tonnage can be expected over the next week or two. Asian pricing appreciated notably over the past week with some benchmarks gaining $20+ per ton over last week’s values.
- Global supply and demand factors are responsible for the current pattern and from a seller perspective, the news is good. USDA’s world market price estimate would concur with these sentiments as the baseline prices were increased by $0.27 – $0.29/hundredweight for long and medium or short grain classes respectively. This is the largest single increase in the WMP for many weeks.
- The domestic cash markets remain fairly stable, although prices continue to appreciate slowly in that sector as well. Along the Gulf Coast, buyers are very active and as sellers hold for higher prices, the market is beginning to climb. To add to the positive news, the quarterly Rice Stocks report released this week for the fourth quarter of 2017 indicates that all rice stocks are down by 25% from the same time last year. With a smaller crop and dwindling stocks, the impasse between buyer and seller pricing ideas would seem to be fracturing in favor of the sellers.
- The futures market has been enlivened by the generally bullish atmosphere over the week with positive gains over last week’s close in all open contracts on the board. Last week’s optimism about a market reversal to the upside appears to have been well founded, although the upper limits remain constrained at this time.
- In other news, USDA released its first world agricultural supply and demand estimate for the 2018 year. The current release saw minor revisions to both sides of the balance sheet. On the supply side, total production was decreased incrementally to 178.2 million hundredweight with a minor increase in yield and long grain production being partially offset by a decreased medium/short grain production estimate.
- The demand side showed an increase in the domestic usage by 5 million hundredweights that was partially offset by a 3 million hundredweight decrease in exports. The net impact of the adjustments was a 1.8 million hundredweight reduction in ending stocks, bringing the forecast to be the lowest level of ending stocks since 2003/2004.
- The season average farm price was decreased by $0.20/hundredweight on both ends of the scale ($12.10-$13.10) as a result of lower average pricing. All things considered, the market appears to be gaining some traction toward stronger prices and with several weeks to go before the Asian and South American harvest comes online, there is a lot of market potential. Domestically, with stocks growing ever tighter, it will be very interesting to be in the rice trade between now and the new crop harvest.
The Rice Advocate