Rice Market: Weakening Fundamentals; Weather Hampers Trade

The rice market seems to have become softer over the past week, transitioning from the bullish undertone that has been noted for the last month or so based on an influx of more bearish news and weakening fundamentals.

The export sales report for the week showed a decrease over last week’s volume of almost 75% with a total of 15,100 MT reported. This is the second week in a row that this figure has diminished, putting the current levels down by about 188,000 MT from the volumes reported at the first of the month.

There are a myriad of likely culprits for this, not least of which is the overall volume purchased during that earlier interval. The three week average is still in excess of 90,000 MT which is still considered strong, however a continued diminishment of the sales will further dilute that number.

Vessel loadings were also off as compared to the previous report but still at a moderate 54,500 MT. Flooding along the Mississippi River continues to disrupt traffic, leaving the brunt of rice exports from the Upper Delta to depend on rail and limited barge traffic. As conditions improve, it is likely that the export pace will respond accordingly.

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Asian pricing has seen some minor fluctuation to the downside as well. All of the benchmark origins showed mild decreases over last week’s values, although the changes are a result of changing currency valuations as much as anything else.

USDA lowered its world market price estimate this week for both classes of rice, which is consistent with the general market direction at this time.

Domestically, there have been virtually no changes in old crop pricing as growers are firm at current levels and bidders have not gotten overly aggressive at this point. Planting continues apace across the South as weather permits and Texas and Louisiana have a significant portion of the crop emerged at this point.

The futures market seems to have continued its downward trend this week and has been consistent with the other components of the market. The WASDE report released this week had a lot to do with the direction as the very bearish numbers took the market by storm.

This week saw the open contracts on the board lose almost 3% in value in the two nearby contracts with the deferred months shedding between 0.8% and 1% of their value over last week’s close.

As has been mentioned, the USDA released its April World Agricultural Supply and Demand Estimate this week with some revisions to the demand side of the balance sheet. For this month, the demand side changes were a 4 million hundredweight decrease in exports.

Offsetting changes were reported for domestic use (1 million hundredweight increase in long grain vs. 1 million hundredweight decrease in medium/short grain) while no supply side adjustments were reported. The net impact of these changes were an increase in ending stocks by 4 million hundredweights and a decrease in the season average farm price by $0.10 at the midpoint of the range ($11.80-$12.40).

The next WASDE report (May) will give us the first projected glimpse at the 2018/19 crop numbers and as the projected planting numbers will be used to generate supply side numbers, it can realistically be expected that this will be a bearish report for the market.

Unfortunately, it will be July at the earliest before these supply side factors can be reconciled with fact making the next 3 months a difficult time for the rice market.

Full report.

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