Rice Market: Trade Ignores Bearish USDA Report

Photo: Texas AgriLife Extension

It has been another quiet week in the rice industry and while there have been some underlying market changes, the impacts on cash pricing have yet to be realized. Export sales for the week were posted significantly higher than last week’s volume at almost 100,000 MT. This is a highly welcomed figure and hopefully more will follow in the weeks to come.

Just as last week saw marketing year lows in the export tonnage, this week marked marketing year highs with a whopping 133,000 MT on the books. The current volume will most certainly be unsustainable but a happy medium of 70,000-80,000 MT per week would be a boon to the trade.

Asian pricing has slipped yet again this week with benchmark pricing shedding several dollars per ton in value since the last report. The trend seems to be driven by fundamentals at this time, with an abundance of supply helping to suppress values. Currency valuations have also contributed. USDA lowered its world market price estimate for the week by $0.14 per hundredweight for both classes of rice. This adjustment is more than likely a result of declining Asian values.

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In the domestic cash markets, virtually nothing has changed from a price standpoint. Texas has seen some price appreciation resulting from supply constraints, while the Delta has seen some pricing gains based on futures market moves. The underlying basis and price point for the buyers seems to be relatively unchanged. Harvest is progressing well, and weather permitting will be completed in short order. As the first cool front of the year moves South across the growing area, some fields will be affected but at this stage the crop should see minimal impact.

In the futures market, the open contracts posted positive gains for the week across the board. Gains ranged from 2.2%-2.8% respectively. Average daily volume was up as compared to last week’s session while the open interest decreased over that of a week ago. Also of note was the release of the WASDE report on Thursday.

While the report itself was arguably bearish to rice, the trade did not feel as such and the market response was generally positive. Key supply side revisions were an increase in the total supply number as a result of higher projected yields. The average yield estimate was increased by 53 pounds per acre. There were no demand side edits to the balance sheet in this report.

The net impact of the increased production was an increase in ending stocks of 1.3 million hundredweights. As a result, the season average farm price was decreased by $0.20 per hundredweight to $13.00 per hundredweight.

Full report.

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