Dossett On Rice: Plenty Of “Ifs” On The Horizon

    Rice harvest. ©Debra L Ferguson Stock Photography

    Cash Market:

    India remains the #1 rice exporter in the world and their prices have remained steady for many weeks. The monsoon was late but has continued to be active way past the normal September 1 ending date. This has allowed late-planted rice to complete a full growing season.

    Thailand is the planet’s #2 rice exporter, and they have had steady prices for 6 weeks. The Thai government has set price guarantee criteria for 5 types of rice. It is a complicated proposal with moisture limits and only certain amounts for each type of rice.

    They will spend Baht 21.4 BILLION to support the prices. The exchange rate today is one US dollar to 30.43 Baht. It was just a few years ago that they ran the Prime Minister out of town for a similar support scheme. One has to wonder: “When will they learn?”

    Pakistan has increased its exports by 37% in the last 3 months. Vietnam seems to have the lowest price of all the major exporters.  Japan went through a “super” typhoon this week, and we await damage estimates.

    Brazil and northern Argentina are struggling to get crops planted in very dry conditions. This could easily affect rice. Uruguay seems to be okay.

    In the U.S., this crop’s growing season came to an abrupt halt on Thursday night, October 10, when temperature fell 40F in parts of the country – with tremendous rain and snow accompanied by 40 mph winds.

    It remains to be seen if there was rice damage, but I know for sure there was corn, bean and cotton damage. There is another major cold front due next week. We also have the potential for the super typhoon leaving Japan to circle around and cause a third front in in the U.S. in 10 days.

    USDA released the monthly WASDE report on OCT 10. As usual, we are very doubtful about their estimates but it does not matter because that is old news and the NEW news is the series of cold, wet fronts that will hurt the late harvest. The November report will have yield reductions on all grain and probably rice.

    The biggest news affecting all the ag markets is the looming announcement on Friday, October 11, of a trade deal with China. We do not know the details yet but there is a good chance that it will finally result in significant U.S. rice sales to China for the first time.

    Futures Market

    November rice futures still have a buy signal. November rice futures are trying to move to the top of the massive triangle that has been developing since July.

    A breakout of the triangle would be a close above $2.30 CWT. There are 6105 contracts of open interest. There are 1,077 contracts of certified stocks for delivery as of October 11. Both of these are reductions this week.

    Open interest declined during the recent rally indicating Short Covering. The registered receipts dropped 60 contracts, as McGehee, Ark., shipped rice down to New Orleans for export. Weekly exports continue to be very strong.

    If – and that is a big if – we sell a substantial amount of rice to China or any other major buyer, the market can break out of this trading range and move towards $13.00 cwt. Just beware of the week before FND, which happens to be Halloween. Trick or treat?

    • 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 involves significant risk of loss and may not be suitable for everyone.

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