Rice prices in India have settled back down after a big jump on November 9-13. There is concern that Iran’s imports are down 4.2% from March to Oct. Their exporters are also reporting tougher competition in the export market.
China controls huge rice stocks, up about 2% from last year. China is exporting a lot of old white rice and parboiled to Africa at prices of $325 MT. Thai white 5% prices have dropped to $402 MT. White 100% grade B is $423 MT this week.
Philippines has rejected tender this week. I guess they think they can buy rice cheaper than current market. Indonesia will be in soon for more purchases as well as Iraq. This morning USDA reported that Nigeria will be the 2nd largest importer in 2019. Imports should rise 13% to 3.4 MMT.
Mississippi State held their fall rice outlook meeting and predicted a 10% increase in 2019 rice plantings. Compared to soybean prices, rice does not look so bad, so that estimate is not surprising to me. However it is a long way to rice planting time and I predict we will have a major change in tariffs by then and so I think soybean prices will be much higher by March. U.S. cash rice prices now are close to $11.00 cwt.
It has been a long, long time since we saw only 206 contracts delivered on this rice futures market. It has been even longer since we had only 152 contracts certified for delivery at the end of November.
The vast majority of rice has been harvested, dried, and tested. So it looks like the large rice merchants and large CO-OPs are holding their rice back for exports and domestic sales. That is very bullish for futures price. Farmers that sell their rice at turn row and get a position on the board for replacement hedge do not have to worry about the Big Boys dumping excess rice on the futures by delivering hundreds of contracts. This may change if we rally up to $12.00 cwt but currently futures are holding slightly below the cash price in U.S.A.
So where do rice futures go from here?
We are still watching the reverse HEAD and SHOULDERS formation in Jan. rice. If, and this is a BIG IF, we break through the $11.27 level, the chart projects to $12.40. Of course that will require a lot of exports and very strong domestic consumption. If the exports do not materialize and then deliveries increase, we could work between $10.40- $11.20 for months.
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.