Dossett on Rice: Overbought – Time for a Correction

©Debra L Ferguson Stock Photography

Cash Market

Rice prices in India have continued to fluctuate. They are $412 for White 5% Broken. Up one week, down the next.  

We are seeing the end to the massive buying by Sri Lanka and Bangladesh that kept India prices so strong. Thailand prices had a big drop for 3 weeks but surged this week to $428 for White 5% Broken and up to $455 for 100% Grade B.  Philippines demand is most probably the reason. Philippines plays a game of asking for rice bids, then saying they do not really need it. All the rice traders know that they do need more rice, so it is just a waiting game. Philippines is buying rice now. China has also bought rice from Thailand this month. The Bangkok Post is reporting that the strong Baht has slowed exports a little. Also, the Chinese New Year holiday probably slowed exports the last 3 weeks.

U.S. prices seem to be holding steady at $12.50 – 12.75 CWT, but we have heard of higher bids out of some exporters. All rice is in strong hands at this time, so it will now be a seller’s market.

The USDA has released their estimate for 2018 and there were no big changes for the U.S. from the February numbers. World-wide numbers were increased by India estimates.

In South America, where the harvest is underway, we have an increase in Brazil and Paraguay but a decrease in Argentina due to many weather problems.

Futures Market

We have completed the March deliveries with little fanfare, except for a VERY tight spread between March and May. There were 1,152 deliveries, with one of the Houses that normally delivers being a very large buyer. We saw one firm that is one of the largest exporters take a lot of contracts. We expect those to be shipped. There are 1,351 contracts registered. We saw more contracts from McGehee shipped down the river. During the first week of deliveries, we saw 200 more contracts registered. Right now Harvest Rice at Otwell has the most receipts at 609.

Rice, like all grains, has gotten overbought, so a correction has begun. Support for the May contract starts at $12.15 CWT. If we hold there, we will be tracing out a triangle that projects higher prices this spring.

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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