It has been an interesting several weeks in the rice industry since the last report as several new pieces of information have materialized that have contributed to the market’s perception of the 2019 rice crop. The weekly export sales report showed sales at a reasonable 65,900 MT for the week which was up notably from the previous week’s numbers. This is a modest boost over the very low values seen earlier and with current export cycles still in effect, the report next week should note some gains.
Vessel loadings were up significantly against last week’s volume at 45,000 MT for the week. This number is more of a reflection of how weak the last set of numbers were as opposed to how strong this week’s performance has been.
One point to note is that the next few weeks will probably note a rather significant drop in export volume as the pending tropical system moves into the Mississippi river basin and disrupts the ability to load to the export market. This impact will probably not be readily apparent in the next report as there is a week’s lag time between the exports being sold/loaded and the USDA reporting system.
In other international areas, Asian benchmark prices have remained virtually unchanged over the past two weeks. Both currency and fundamental stability have contributed to this phenomena. With no indication that this scenario will change in the near future, the competitive spread between U.S. and Asian origins will likely remain static.
USDA raised its world market price estimate this week for both classes of rice which is interesting given the general stagnation in the global marketplace. The pattern noted over the past several weeks was an increase followed by a decrease, followed by an increase again. All of this points to the fact that the “official” estimates are as uncertain as the rest of the market.
In the domestic market, price indications have been fairly flat over the past several weeks as well. From a production standpoint, the new crop is progressing consistently across most of the rice growing region. All eyes are currently watching the tropical disturbance in the Gulf of Mexico that is expected to severely impact Louisiana and work its way up the river.
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In addition to the damage done to the new crop production, the export reduction resulting from the excess flooding will have a negative impact on the ability to liquidate and move the swollen old crop stocks that have carried over from the 2018 crop.
The futures market had a good week with all of the open contracts closing in positive territory. Gains ranged from 3%-4% on notably lower volume but higher open interest.
In other news, USDA released its July WASDE this week which incorporates the June 30 planted acre numbers that caused such a market reaction several weeks ago. The report itself made some notable changes to both sides of the rice balance sheet.
On the supply side, production was increased on a higher harvested acreage projection, mostly in the long grain category. This production increase was partially offset by reduced by a 5.7 million hundredweight decrease in beginning stocks. The demand side of the report saw higher domestic use and exports which resulted in a total usage increase of 6 million hundredweights.
The net impact of these revisions was a decrease in ending stocks by 1.1 million hundredweights and an increase in the season average farm price by $0.10 to $11.80 overall.