Dossett On Rice: Watching The Midsouth Rain Totals

U of A System Division of Agiculture photo by Dave Freeze

CASH MARKET

  • Prices in Thailand and India are steady to higher from last week. All eyes in Asia are on the approaching monsoon, especially in India. The Indian monsoon usually arrives on June 1 and ends September 1.
  • A heat wave has been the main weather fixture in India for the last month. That’s not too unusual but bears are watching. Current forecasts call for a below-normal monsoon because of El Nino. However, “The Times of India” is reporting that there will only be a slight reduction in rain.
  • Speaking of monsoons – the U.S. spring has turned into a monsoon. We have clients in all 5 long-grain rice producing states and we do not have any customer in any state who is happy with the excessive rain and many who are experiencing “Shock and Awe.”
  • Reports are that 20% of Arkansas rice has been planted, with a prevented plant date of May 25. Many large and longtime rice planters are beyond concerned and are approaching despair.
  • USDA released the May WASDE Report on Friday, May 10. As always, they are a day late and a dollar short as they continue to forecast an increase in acres and production in the U.S. I suggest they look at a cumulative rainfall map for 6 weeks in Jonesboro, Arkansas, and Cleveland, Mississippi, and then call a rice producer in either or those states or Missouri and hear the frustration, resignation and desperation in their voices.
  • The good news for rice producers from USDA is that they are predicting a 2.5-million-ton reduction in China production and a 1.0-million-ton reduction in India. Thailand and Vietnam will be up a little. USDA also predicts a 4.1 million ton increase in world consumption.

FUTURES MARKET

  • We continue seeing registered receipts being traded around every day. We now have delivered over 1,000 receipts against the May futures and there are only 642 registered receipts. That means that big banks, co-ops and merchants are playing games.
  • While the big boys are playing games with May, one or more of the short selling computer traders checked out the weather reports and forecasts. On Tuesday, May 7, that trader decided to cover some shorts. Then we had a significant move up that day and traded over 900 contracts.
  • However, the commitment of Traders Report shows they may still short 2,000 contracts.
  • On Thursday and Friday, the short tried to protect their position by putting out large offers to sell above the market and then hammered the July futures on the close. They are making a stand at $11.00 cwt in July because the 150-day moving average is right there. We just closed at 10.99 in July on Friday. IF we go through $11.00 on Monday morning we will head for $11.37, which was the high on March 27.
  • If the rain does not stop in Arkansas until June, this market will seek the highs of last August, above $12.00. My forecast does not show good dry weather until May 21 in Arkansas and in the Mississippi Delta. The stochastics indicator is getting overbought. However, I would not short this rice market with Confederate money and I am the Commander of the Sons of Confederate Veterans Camp #129 this year.

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. 

Note: Futures and options trading involve significant risk of loss and may not be suitable for everyone.


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