Dossett on Rice: Soybean Prices Move Up, Rice Acres Will Go Down

Rice harvest. ©Debra L Ferguson Stock Photography

Cash Market

  • Bangladesh has cancelled a rice order they had with Thailand, and this, among other things, has resulted in another sizeable drop in Thai prices to $428 for 5% Broken.
  • India prices dropped last week but are firming on Friday morning. The Indian government has said they have target to buy 5.5 MMT of the Rabi (winter) season rice, this is an increase.
  • We are waiting to see if the Philippines will finally award an order for the 250,000 MMT that they have been in and out of the market with for an entire month. We know they need it; we just don’t know when they will get serious about part or all and get it bought.
  • We also await the next Iraq tender. Iraq usually tenders for 30 MMT but if they get a good price or prodding from political influence, they can buy 90-120 MMT. USA will probably not get an order unless Washington applies strong pressure. Uruguay, Thailand, and India know how to grease the palms of the Iraqi buyers.

U.S. market is quiet but strong.  We hear of bids from $12.65 to $13.00 CWT depending on location and quality. All eyes are now on soybean prices as a further rally in that market will trim some of the acres that were planned for rice. I think the bean rally is overdone, but we are seeing major reduction in estimates on harvested beans and corn in Argentina. I know the drought and high temperature in Argentina did not help the rice crop either.

Futures Market

  • The rice futures market has begun the correction we were worried about last week. The March contract is 10 days from FND, which is Wednesday, February 28th. Most months we decline into FND, but this month I will not be surprised to see a bottom next week.
  • We still have 5,013 contracts in open interest in March with 1,282 registered receipts to satisfy the demand. If March gets below 11.80 CWT, I believe we see more people stand for delivery and more receipts leave warehouses and move down the river.
  • The weekly Exports Report this Thursday was better at 57,000 MMT with 55,200 MMT shipped. This is still not up to the 70,000-80,000 MMT that would encourage new buying, but we are moving in the right direction. We are approaching oversold on technical indicators, but with a Monday trading holiday it might be Thursday or Friday of next week before we see a solid bottom.

Markham B. Dossett was a charter member of the New Orleans Commodity Exchange. He has traded rice since early 1981. He owns Talon Asset Management LLC where he hedges rice, soybeans, corn, wheat, cotton and cattle for producers in the South and Southwest. 

** Futures and options trading involve significant risk of loss and may not be suitable for everyone.

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