Rice Market: All Eyes on USDA’s Stocks and Planting Report

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The rice market has continued to consolidate over the week since the last report. The export sales report noted a very significant increase in volume over the previous week’s report at 203,600 MT of total sales. This is a very large number and is second only to the February 14 report of 306,000 MT for a marketing year high.

Given the aggregate nature of the February report (this was the first released after the government shutdown), this week may actually represent the strongest week in export sales yet seen in the current marketing year. Continued export demand remains crucial for the health of the industry, and these larger volumes are welcomed by the trade.

Vessel loadings were also up from last week’s report. Continued shipments of 60,000-70,000 MT per week are helpful in keeping rice moving through the system. Asian benchmark pricing has seen very few changes since last week.

Following the fundamental shifts in price movement noted in the past two weeks, it is likely that more adjustments are in the offing in the coming weeks as the macro factors gain a stronger foothold. For this week though, pricing seems to be more exchange rate driven over the near term. USDA has held its world market price estimate constant yet again which further underscores the stability in the global industry.

Domestically, cash prices have been somewhat constant across the board. Inventories in Texas and Louisiana are disappearing rapidly and as such, those areas have seen larger price jumps over the last ten days than other regions. The price changes have actually brought those areas closer in line with the national market and have demonstrated that supply and demand factors are seizing control of the pricing equation.

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Drier weather has remained over much of the rice growing region which has resulted in a flurry of activity as growers head to the fields. A significant amount of planting and fieldwork has been accomplished in the interim and while the industry is not quite back on schedule, it definitely looks to be in a better place than it was two weeks ago. The rapidly drying weather combined with the required field preparation has many growers looking forward to a chance of rain in the forecast this weekend in order to replenish soil sub moisture.

The futures market this week noted losses for the first time in a while as the market seems to be testing some upward resistance. All of the open contracts on the board showed 1.4%-1.8% losses over last week’s values, although both volume and open interest have spiked. Some bearish tendencies will probably persist into next week as a result of this week’s trading.

This Friday, USDA will publish the rice stocks report as well as the annual Prospective Planting Report. Overall rice acreage is expected to decline in the US for the 2019 year, likely by as much as 10%-15%. Balanced against this supply side shock is the significant magnitude of the carryover inventory on the demand side.

The market will position itself accordingly over the next few days and we look to have some additional information to analyze in next week’s edition.

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