Dossett on Rice: Looking for Dips in a Weather Disaster

Rice beginning to flower. ©Debra L Ferguson

CASH MARKET

Thai rice prices have jumped again, White 5% broken is up from $407 mt last week to $415 on 05 June. White 100% Grade B is trading at $431 mt from $423 mt. The EU has agreed to allow Thailand to negotiate exports quotas for 31 products. This includes 9 rice products.

Rice prices have hit a 3 year low in Bangladesh after a good harvest resulting in abundant stocks of rice.

India’s prices are also firming as there is expectation of lower planted average. All eyes in India are watching the development of the monsoon. Temperatures in much of the country have exceeded 120˚F for weeks and at this time the monsoon is not as intense as normal. The monsoon starts in the Bay of Bengal and moves from SE to NW reaching Sri Lanka first and then moves up through the South-eastern states. These states are major rice producing areas. Right now we are 1 week behind schedule with the Indian monsoon.

U.S. Rice Market

Weather extremes in USA have delayed planting for most all of the 5 long grain states. Those farmers who have rice in the ground have challenges applying fertilizer and herbicide.

USDA is starting to talk about Prevent Plant in rice, corn, and soybean. Do not hold your breath for a definitive acreage number until July report with final estimate in August.

Besides Prevent Plant and late rice planting resulting in reduced yield, we think there is an increase of over 100,000 acres over medium grain in Arkansas. This increase comes at the expense of long grain acres. All told we are looking for a major reduction on long grain acres and also reduction in yields in the southern U.S..

Great News! Weekly Rice exports this week were  126,500 mt. Iraq accounted for 120,000 mt of that total.  

FUTURES – THIS IS A BULL MARKET!

There are computer algorithm shorts and large speculators who short rice. It is hard to tell which one is carrying the majority of short open interest. It does not really matter as they both decided to cover those shorts over the last 2 weeks resulting in a major move in rice futures prices.

We are now overbought in July futures. However we can stay overbought for a long time because we were oversold for a long time. And we do not have a weather scare, we have a weather disaster!

After the initial run up to $11.90 cwt on May 29 we had a little correction to $11.37.

We are at $11.72 in July as I write this comment. Registered receipts have held steady at 663. We have 184 at McGehee, Arkansas, and 316 at Otwell, Arkansas. We will watch very carefully to see if the McGehee receipts move down the river.

I have only been trading rice for 38 years but I do not remember a more challenging year on ALL long grain states. Therefore I will buy dips as I think we are a long way from the high in rice futures in 2019.

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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