Dossett on Rice: Expect International Prices to Stay Strong

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CASH MARKET

Thailand reports that they have sold all government-held stocks. They have exported 11.12 mmt of rice. This number slightly exceeds their goal for 2018. Now, they plan to focus on export of high-priced Thai Hom Mali, colored rice and other premium types. Thai prices for White 5% have risen to $410 mt after holding at $403-$404 for five weeks. 100% Grade B is up to $432.

Indian prices are moving higher as demand throughout SE Asia is very strong. Recent White 5% is $412. Pakistan is priced at $393 mt, Vietnam is $417 mt, and USA is $600 mt for 4% Broken.

Philippine President Duarte is expected to sign a new Rice Tariffication Bill soon. This will limit government role in purchasing any rice. So now we have seen a number of countries in SE Asia stop or reduce government support and interference in rice pricing. I believe this is the best way forward. It will cause lower prices in years of larger surplus, but will cause much higher prices in years with shortages.

Brazilian production is forecast to decrease 4.5% – 6% this year.

China has cleared U.S. Rice for import. This has been a long slog over 3 years as we have bent over backwards to satisfy their “phytosanitary protocols” and other nit-picking requirements.

Of course the entire U.S. Ag industry is awaiting final resolution of the tariffs that have hampered soybean sales. We may be selling rice to China now, but with the government shutdown we are not getting the regular Thursday export reports. I would like to see them. We also are not getting the monthly WASDE report. Well, that is fine with me because I have believed they were not accurate for over 5 years.

Latest government estimate was for a 10% increase in rice acres but one well-known rice trader believes there will be a reduction in rice acres in U.S.A. I believe there will be robust demand for the next five months, so I think international prices will stay strong.

Futures Market

The January rice contract ran right up to FND with only 14 contracts registered. As expected, we had large registrations in Jonesboro and McGehee on FND and ended up with 900 deliveries. The Futures swooned with March contracts dropping to $10.10 cwt.

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After all the rice found a good home, we have rallied back to a high of $10.93 on Friday 11 January. I was hoping we could rally back to the 150 Day Moving Average at $11.04 but we are now overbought so there may be a correction in the next week.

The 50 Day Moving Average is at $10.79. That is a very important Moving Average for many large traders. I still like this market, but with any thinly traded market, expect wild fluctuations.

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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