Dossett on Rice: September Futures Broke Through this Week

Rice harvest. ©Debra L Ferguson Stock Photography

CASH MARKETS

Thai rice prices are starting to firm up. The 5% White traded $399 this week, up $2 from last week. Vietnam is a little lower at $390. India prices are steady at $400. 

I can’t believe it but Thai politicians have approved another loan scheme worth 35 billion baht. It is multifaceted but includes a 3% interest rate subsidy for traders who agree to store their rice. I hope this does not last long because last time Thailand had a government buying program it caused a massive increase in stocks and was a large overhang of supplies for three years, resulting in prolonged bear market.

The ministry of Commerce in Thailand is focused on selling more premium rice to China. For the last two years, Thailand and Vietnam have encouraged their farmers to grow less rice but higher quality. There is great emphasis in planting more soft texture rice which is desired in China rather than hard-texture rice farmed by the Middle East and India.

I know that many US rice farmers are frustrated that we do not get more business from Iraq and Iran. We see a lot of that business go to Uruguay at higher prices. It has been explained to me by more than one very senior rice broker that Uruguay grows exactly what the customers want where whereas U.S. farmers grow the varieties that yield the most. So before we get mad about losing export business, let us first ask “Are we offering the customer what he wants?”. More and more countries are realizing that quality trumps quantity.

The Texas and Louisiana farms are in full harvesting mode. Weather is cooperating so they are moving rapidly. Some rice is already dried and the trains are leaving the South Louisiana Rail Facility for Mexico. Exports are slow this time of the year but I expect them to pick up as the prices fall.

FUTURES MARKET

Sept rice futures finally broke this week after a prolonged period of quiet and steady range from $11.80 CWT-$12.00. There is no doubt that the short sellers and big Co-ops want the price below $11.00. We talked to one knowledgeable rice trader who believes we need to see $10.00-$10.50 to be competitive in the export markets. The reason we held at the $12.00 level for so long is because we ran out of rice.

There are a total of 35 contracts registered for delivery in Arkansas warehouses. There are usually 1,500! I’m sure the big merchants, Co-ops and short sellers will get more contracts registered as soon as the Arkansas, Mississippi crop comes in. That will help them offer the futures down. WE were successful in hedging some rice at $12.00. We had hoped to sell more at $12.50 but now with the harvest underway we probably have seen a short term high.

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.

 


The Latest


Send press releases to Ernst@Agfax.com.

View All Events


Send press releases to Ernst@Agfax.com.

View All Events