Dossett on Rice: “Market Moving in My Direction”

©Debra L Ferguson Stock Photography

CASH MARKET:

Rice prices in Thailand have dropped $5 per ton in the last week. They had stayed steady for five weeks but now are showing weakness. The strong baht is limiting exports at this time. The Thai exports may drop to 8 million tons from the normal 10—11 million tons. In US dollars, Thai rice is priced about $50 per ton over Vietnam and China is exporting to Africa. Vietnamese prices are dropping on weak demand from China and Philippines.

India prices have remained steady for a few weeks but there are some provinces where paddy rice is receiving higher bids. Indian exporters will now have to obtain a certification of inspection from the government agency to ship both basmati and non-basmati varieties to countries in the EU. The EU is trying to cut down on the level of tricyclazole, which is a fungicide.

US cash prices are holding very close to futures. Right now cash is about 10-20 cents under January futures. Most of us remember when, just a year ago, futures would stay a dollar discount to cash.

Exports this week were lackluster at 53,500 tons. Mexico, our largest customer was the only long grain buyer. We have had a long string of great weekly exports until this week. Weather has continued to be a challenge all year, first too wet and cool, then too dry in late summer and now too wet and too cold. We do not know exactly how much rice has been degraded at this point but you have to believe some yields and milling yields have dropped in rice that has been harvested late in the northern half of the 5 long grain states.

There was a lot of second crop not planted in Texas and those farmers who did plant are not optimistic about yields. The best and most consistent yields we have heard about are in the Mississippi Delta. Reports of 190-200 bushels and 55/70 from Gemini.

USDA has just released the November 8 WASDE Report. While I do not usually agree with USDA reports, especially on rice, this month’s outlook is for lower supplies, unchanged use, and decreased ending stocks, so they are moving my direction. Globally, USDA is predicting 1.4 million ton more supplies, but they usually show an increase.

FUTURES MARKET:

Since the USDA report was released, we have seen a little rally of about 5 cents to $12.08 in January futures. The report is slightly favorable. We are shipping receipts out of Otwell, Arkansas but received more receipts in McGehee. Total now is 805, down from 1,077 lasts week.

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Futures have been uncharacteristically quiet for two months as we coil up into a triangle or pennant formation. We still have a buy signal from the stochastic so I like being long. A breakout of the triangle would be a close above $12.20 in January futures. On the downside, we would be concerned if there was a close under $11.80 on January futures.

A move to $12.50 on January would just retest the high in the January contract that we saw on September 19th of this year.

Now that the USDA is starting to show smaller US long-grain production, if we get a strong demand this winter, I think $13.00 is possible. I am happy to see futures and cash tracking closely.

  • 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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