The May contract is retesting the January 11 high of $11.08 this week. Keep in mind the May contract posted a key reversal down on January 11 when it last traded to $11.08 ½. For the nearby futures contracts, $11 has been rocksolid chart resistance since last August.
Basis offers for old crop rice have been attractive in recent weeks.
Many times, the basis can erode on a strong futures rally. Strong demand and tight inventory is needed to maintain basis strength. Since February 20th the May contract has rallied $1.18/cwt (as of Thursday 3/21). May 2019 CME Rough Rice Futures.
Also worth mentioning, the new crop September contract is also trading at $11/cwt this week. Since the week of February 18, the September contract has rallied about 93 cents/cwt (42 cents/bu). New crop basis is generally 18 to 30 cents/bu under September futures, depending on delivery point. This equates to new crop bids in the $4.66 to $4.77/bu range.
Explaining with 100% certainty why a market rallies or sells off can be near impossible. It’s likely concerns that significant acres would switch away from rice was a price driver over the past month. The current fundamentals facing the rice market are bearish and the weather-related fieldwork delays both pointed to lower 2019 rice acres.
Given the new crop rally back to $11, one now has to wonder if rice acres will materially change at all this year. What alternative crop would rice acres shift to? New crop soybean basis remains very weak.
Rice News on AgFax
Basis for fall delivery to the Mississippi River is 20 to 30 cents under November futures. Fall delivery to local elevators is 40 to 50 cents under, which places bids in the $8.95 to $9.05 range this week.
This sets the yield bar for soybeans pretty high before a seed is even planted – 50 bu/acre at least to break-even on rented farms.
The inability to shift some rice acreage to an alternative crop does not bode well long term for the rice market. One could argue today that 2019 rice acreage will remain essentially flat yearover- year – assuming a favorable planting window eventually opens.
The NASS Prospective Plantings report (due out next Friday) will shed some light on grower’s intentions as of early March.
The black cloud over the soybean market continues to be the lack of a trade agreement between the US and China. Unfortunately, it appears that planting will be underway before any trade deal is finalized. If there’s any good news, it is the fact that the US and China are still in negotiations.
Trade Representative Lighthizer and Treasury Secretary Mnuchin will be traveling to Beijing next week. China’s Vice Premier is expected to travel to Washington the following week.