Dossett on Rice: July Futures Continue Correction – Still Looking for a Rally

Young rice crop. ©Debra L Ferguson Stock Photography

Cash Market

Prices in India and Thailand are rock solid.  Thailand was down $1.00; India was steady all week.  There is still good business from tenders let by Malaysia, Philippines and Indonesia. USA markets are oh-so-quiet and firm. I finally found a customer with quality rice. He will not sell below $13.75 CWT.  So far the crop looks good in most states but some areas that were too wet for the last few months now really need a rain. 

Weather-wise we are watching the volcano in Hawaii as ash plume reaches 30,000 ft. The sulfur dioxide that is being injected into the atmosphere will have an effect on the growing season and rainfall for the next two years.

Futures Market

July rice-futures are continuing a correction as of Friday, May 18. We have seen this before, but we are now at a $1.00 CWT discount to cash market.  That tells me that the short seller is a large technical speculator who is not aware of the tightness in the cash market. We are still one month away from delivery, but as predicted in this letter last week, we are approaching 800 contracts of deliverable rice receipts in Arkansas. There are twenty-one deliverable warehouses and there are only five that have rice certified at this time. Riceland Foods has only nine contracts certified. Harvest Rice in Otwell has 476 and Eastland Rice in Jonesboro has 243 for total of 861 contracts.  At these prices, I will tell you, more receipts will move down the river to fill export sales.

Export sales this week were 35,900 MT with an increase for Mexico and Canada.   Shipments were 51,300 MT. These are not high numbers, but we do not have much to sell at this point. All eyes will be on the Commitment of Trailers Report this Friday afternoon. The report will tell you if this short seller has gotten into a position from which he can’t get out. One thing is for sure, he cannot roll to the September contract because it is at a 50 cent discount to July.

We are optimistic about a rally soon!

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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