Dossett On Rice: The Ball Is In The Farmers’ Court

Rice harvest. ©Debra L Ferguson Stock Photography

Cash Market

Rice prices in India have experienced a setback this week. U.S.DA has forecast that India’s production will drop 2% from last year.

With all the focus on the China deal, many missed the announcement two weeks ago of a U.S. rice to South Korea agreement. South Korea will now provide access to 132,304 tons of U.S. rice and will ensure transparency and predictability around tendering and auctioning U.S. rice.

Thai rice prices dropped $3 mt last week. Bangkok Post reports that Thai production has suffered due to both flooding and drought. The Internal Trade Department said paddy output from the second crop is down 54% from drought, with production from the main crop down close to 10%.

U.S. prices have remained strong. Very good milling yields have received 12.40 to 12.60 ctw. I like the fact that cash prices have tracked so close to futures prices. For many years there was a 75-cent to $1 discount. Some very good milling reports are coming out of Mississippi and Arkansas. There are not many good milling yield reports out of Texas, Louisiana and Missouri. Arkansas is all over the board from good to bad, depending on the county.

This was a big week for export agreements. First, U.S.MCA moved off dead center by the Democrat leadership, who had been holding it up for over a year. Then on Thursday the Trump administration announced that the long-awaited Phase One of the China deal has been settled.

We are not getting a lot of detail at this hour on rice exports in the China deal but I have been assured that the negotiating team has been promoting beef and rice along with corn, beans, wheat and cotton.

Cattle roared out of the box this morning with a big gain in the futures. Rice is continuing its steady climb. We had lackluster weekly exports on Thursday morning but that will be the exception, not the rule.

There are only 477 contracts registered for delivery at this time and only 3 of those are at McGehee. U.S.DA did not change production or acreage numbers in the December 10 report, but they never do. However, they did increase U.S. rice exports by 3 million cwts. Every little bit helps!

Futures: Steady Rise Since November

While corn, wheat and beans have been whipping around and focused on every rumor about China, rice futures have been a steady rise since the January contract bottomed on November 15.

We are well above all the important moving averages. The stochastic indicator is overbought, but when I hear the major rice exporters are calling farmers directly and bypassing the elevator, I believe we might stay overbought.

The shortage of premium milling yield rice has led to some aggressive bidding with prices moving up weekly for the last month.

Farmers know the ball is in their court and many are holding out for much higher prices.

That is probably a smart strategy now but with large acreage increases planned for 2020, I would get the last tranche sold by February. We are watching a large triangle on the January futures chart.

We have bounced off the upper trend line for 2 weeks. If we break through $12.55 we will see strong buying and short covering by the technicians and speculators. Remember, rice is one of the few agricultural crops that is above cost of production.

  • 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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