Dossett on Rice: Weather Improvements Will Change Everything

Cash Market

The drought in Thailand continues to dominate rice trader’s attention. White 5% Broken has leaped another $9 mt this week. Thai prices are now $100 per ton above Vietnam and $90 mt over India. The strong Baht is responsible for part of this rally but weather is definitely a factor. The “Bangkok Post” reports that exports will probably drop to 7.5 mmt – the lowest since they exported 6.6 mmt in 2013.

India rice has made a jump as the world rice has gone bid. India and Pakistan rice shipments to East Africa have been undercut by Chinese shipments. China is trying to curry favor in all of Africa so that they have access to ports and raw materials.

Uruguay and Argentina still have a worsening drought. USA cash prices have been moving up also. We have seen prices from $13.25 – $13.45 cwt in Texas, Mississippi and Missouri. Most of those prices require delivery to a river or elevator.

Of course, in a year like this, with a reduced crop in the USA and now drought in many major producers, cash prices can move higher. However, as soon as all end buyers are covered and the March 31 stocks report shows a large planting intention, the cash market can reverse on a dime. The southern states in the USA, from the Texas coast to Mississippi, are still soaking wet. Hopefully we can dry out before planting time which is rapidly approaching in Texas.

Futures Market

We have not had rice prices like this since October of 2015. The only cure for high prices is higher prices until the commercials stop buying cash and start selling futures. We are above all the moving averages that I watch and the stochastic indicator has been overbought for 2 months.

Over the past 15 years the rice market has been controlled by big short sellers and some of the bigger Co-ops. They have learned a painful lesson in the last 2 months. However, rest assured they will be back as a major seller as soon as there are a few weather improvements and the USDA announces an increase in planting intentions on March 31.

Do not wait too long to sell your remaining cash rice and either hedge with futures or lock in a contract for 2020. Good Luck and Good Hunting.

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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