Dossett on Rice: Contract Manipulation – Where do We Go from Here?

Rice harvest. ©Debra L Ferguson Stock Photography

Cash Markets

The rice prices in Thailand and India have dropped over the past week. Thailand quotes $410 for White 5%. India is $412. Pakistan and Vietnam have maintained higher prices at $450 and $440 respectively.  

Weather Woes

The Indian Monsoon has finally progressed to all the Northwestern States. Pakistan is now anticipating rain. They have been very dry. Weather in China is improving after a long hot and dry spell. Korea and Japan will get a Typhoon this week.

The U.S. Gulf Coast has a very wet forecast all this holiday week. This could involve more flooding from west of Houston all the way to Mobile. Jonesboro, Arkansas has rain forecasted for most every day next week. Temps look good for rice development. Night time temp should be 74F.

The rice areas of Brazil and Uruguay are very wet and the areas of Argentina are still very dry.

Futures Market – Contract Manipulation

It is very frustrating to watch rice futures swing down $2 cwt and then rally $1.50 cwt in one month while the bid for cash is strong and there is very little rice remaining to sell.

We have commented before about the games that large computer speculators, large Arkansas Co-ops, and large commercial shippers play with the crop that you have invested blood, sweat, tears, and a lot of money into. It is not good for the rice producer, the rice industry, or the futures contract.

I have been trading this contract since the opening day April 9th, 1981. Sometimes it reminds me of the old pork belly contract. I really believe there should be a CFTC and congressional investigation into the actions that we all had to endure.

This contract has been manipulated. Where do we go from here? Cash bids that were $13.00 are now $11.90. Shippers and rice mills can see that they can get to new rice in Louisiana and Texas in September.

Mexico’s New President

Also, it was no secret that the left wing socialist AMLO (Andres Manuel Lopez Obrador) was going to be elected the next President of Mexico. It was confirmed on Sunday night. He does not take office until December.

Mexico is the largest buyer of U.S. rice. Will AMLO and President Trump have a rocky relationship? YES! Will Mexico stop buying U.S. rice? NO! The Mexican millers love the quality of our rice and we have everybody else beat on freight. I don’t know when China’s soybean tariffs end but when they do, expect to see U.S. rice sold and shipped to China. This has been a bull market since May of 2017. If we have a wonderful crop in Arkansas and a big yield it may end but that will not be known until September and right now there is a shortage of good quality U.S. rice. Do not get too bearish yet.

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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