Dossett on Rice: Mark this One “Oversold” – Watching and Waiting

Rice field irrigated with polypipe. Photo: Mississippi State University

Cash Markets

Thailand rice market steady at $449 for White Rice 5%. $475 for 100% Grade B.  We have seen a $1 change for four weeks.  The price of Jasmine Rice has soared to $1,250 MT on very strong export demand.  Vietnam prices are still very strong at $458 MT.  India is $417 MT.  

The Indian Monsoon has started on time, but they still have a massive heat wave that has been a problem for over a month.  Time will tell if the Monsoon will progress on schedule to moderate the 107 F temperature.  China and Indonesia have announced a large Government to Government deal for the remainder of the year.  The US cash market is still quiet.  Bids and offers are very wide since the futures market selloff.  I do not know one farmer who is willing to book September rice at a twenty-five cent discount to July.  There are too many variables at this time.

Weather is always an important variable.  The latest long-term forecast has changed.  The most recent data predicts a return to EL NINO by October 2018.  The extremely hot and dry weather we are experiencing now in Texas and the Western Corn Belt is a result of LA NINA.  That is also why we had a cold winter.  Of course, the 5 long grain rice states have had too much rain for the last five months.  This all should change by the fall.  Weekly export sales released on Friday, June 1, were lack luster, but May and June are not normally good months for exports so I am not surprised.  Most rice in the long grain states is off to a good start.  Now we just need to keep bugs under control.

Futures Market

After the big selloff on May 23, the US July Rice futures have fluctuated in a 50 cent range.  We have not been this oversold for this long in over two years. First notice day for July futures is still four weeks away and the July – September spread is still inverted.

The registered receipts have continued to leave registered warehouses and move to New Orleans. We now have 564 receipts remaining.  Only 4 warehouses out of 21 have any rice at all. Riceland Foods has 8 warehouses, but only 9 registered receipts at Jonesboro.  Yes, I know they can register rice in 24 hours and maybe they will.  But I sense that those merchants and CO-OPS that have rice do NOT want to lose or deliver rice in this tight cash market.  Over the last 8 days we have seen close to 300 receipts sent down the river.  What happens if we arrive at FND for July futures with 100 to 200 contracts registered and an exporter demands delivery?  Do the crazy algorythm computers that are short ever think about this?  So we watch the weather, watch the spread, watch the registered receipts, and watch the strong worldwide demand.  I see no reason to sell rice at these prices.

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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