Dossett on Rice: “Target Rich” Export Market; Keep Your Powder Dry

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Cash Markets

Thai rice prices for White 5% Broken have been locked in at $406 MT – $409 MT for five weeks with one jump to $413 last week.  I call that STEADY! 

India has seen an increase over the last two weeks as export season has begun.  All major exporters are excited, as we have seen major natural disasters in Philippines and Indonesia in the last month.  They will probably both be importing rice sooner rather than later.  Add to that fact that Iraq planted very little rice last spring and we have a “target rich” environment for exporters.

Weather did not co-operate during the last half of the rice and bean harvest.  Therefore, we will not be surprised if final yields for the long-grain, southern states do not achieve the great yields and milling yields we saw in the first half of the harvest.  Now attention turns to the Southern Hemisphere for rice production.  Both Argentina and Australia have endured drought in 2018.  So far, there is a forecast for more rain as we transition from La Niña to El Niño.

Export sales and shipments were very good this week.  We sold 67,600 MT of rice to all of our regular customers and shipped 77,200 MT, mostly to the Western Hemisphere customers.  This is a real bright spot for Southern farmers as corn, wheat, and bean exports are very low.

Cash markets in USA are quiet as the elevators are full and we await tenders from a number of countries. With US economy doing well, I expect domestic sales will continue to be robust in 2019.

Future Market

With the optimistic export-market outlook, you would expect me to be bullish on the Futures.  However, we are less than a week from First Notice Day for November rice.  During the last ten years, for the most part, the Futures market has taken a dive before FND, especially in October. We have already seen a major Co-Op and a major exporter work together to drive down futures to facilitate major export business twice.

While the drop was underway, cash prices did not move.  When the large transaction was completed, the futures rebounded swiftly.  Basis the November contract, the good support levels have been around $10.20 CWT twice.  We recently had a correction to $9.66.  We might have gone lower, but the excessive rain in the Southern USA, and typhoons, earthquakes and volcanos in SE Asia reversed that sell-off.

Another reason to be bullish is that there are still only 26 contracts certified for delivery.  They are all located at Jonesboro, AR.  However, watch closely, as I will bet hundreds of contracts will be registered around FND (Oct. 31) and delivered against the November contract.  Keep your powder dry and watch that $10.20 CWT area for support.  That would be @ $10.40 on the January contract.  I’m very bullish long term, but I understand the reality of how this contract is played in the short term.

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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