The May futures contract has rallied about 50 cents off of Monday’s low of $13.15. There have been a number of news stories this week regarding potential reductions in grain trade, most notably by key wheat exporters.
However, Vietnam announced it would place a temporary hold on rice export sales through March 28 in order to evaluate domestic stocks. Iraq indicated this week it would need to import 250,000 MT of rice over the coming months to rebuild reserves.
The COVID-19 pandemic has changed consumer behavior. With families preparing more meals at home and concerns about interruptions in local food supplies, it’s evident this week there is growing concern about food security around the world.
The new crop September contract has rallied about 40 cents off its recent low of $11.50, made last Friday (3/20).
Continued delays in fieldwork in most of the Midsouth is price-supportive. However, NASS did indicate Monday that rice planting in Louisiana was moving along. For the week ending March 22, rice planting progress was estimated at 26% complete compared to the 5-year average of 18%.
In regard to COVID-19, there are pockets of concern around the state regarding delays in getting H2A farm workers. Also, the potential exists for input suppliers to be faced with temporary labor shortages if any employees contract the coronavirus.
Many debate if there will be logistical problems and delays in getting adequate farm inputs in place throughout the entire growing season? Will trucking, rail, river systems and ports continue to operate smoothly?
The potential impact from all of these issues is unknown, but certainly a recognized risk to getting the 2020 crop planted and delivered in a timely manner.
Rice Futures Held Up Pretty Well
On a final note, rice futures have not endured the sharp price declines seen this month in corn, soybeans, and cotton. As of Wednesday’s close (3/25), September rice futures were down only .3% year to date.
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New crop corn and soybean futures have recovered some over the past week but are still down 11% year to date. The situation in cotton is far worse, with December futures down about 23% and trading below 55 cents this week. September corn trades at $3.56 and November soybeans at $8.78 as of this writing.
As a result, new crop rice futures have not had to bid for additional acres—prices for competing crops have done all the work. If the weather will cooperate, the rice market knows the acres are bought.
Note the September contract is spending less and less time at or above $12—only closing above $12 three times this month. Two of those days were March 2nd and 3rd and most recently March 18th. More-than-usual liquidity exists in September ’20 rice futures with open interest currently at 2,426 contracts.
Have a plan in place to manage the potentially large downside price risk facing the 2020 rice crop. Consider protecting a profitable price level through hedging to enhance the potentially large PLC payments that could be available following the 2020 marketing year.