The coronavirus pandemic has taken on a life of its own and has dominated both the news cycles as well as the marketplace for several weeks now. As businesses close their doors in an effort at containment, the rice market continues to move forward as always.
A complication in this business-as-usual trend is the inability to get accurate information in a timely fashion. This is injecting additional uncertainty into an already volatile market.
Additionally, traditional suppliers and supply chains are being impacted by the closures (both domestically and abroad) which has lead to a constant flux within the industry as a whole.
Within the traditional market indicators, export sales were significantly increased for the week as compared to last week and the multi-week average. Overseas buyers are anxious to acquire sufficient inventories to cover their markets until new crop harvest, largely in the name of food security.
This buying tendency is compounded with the closure of both India and Vietnam over pandemic concerns. Eliminating those sources of rice has sufficiently stimulated the market that many countries are going outside of traditional trading partners in an effort to secure rice in volume.
Vessel loadings were also much stronger, an indication that not only are sales being made but that shipments are much more prompt than is normally the case.
Asian benchmark pricing has generally been stronger over the week, although it has become increasingly more difficult to interpret those numbers. The normal exchange rate matrix is still in place as a price mover, as is the general market fundamentals in Southeast Asia (specifically the Thai drought conditions).
With India and Vietnam stepping back from the international scene for an undetermined period of time, other Asian origins will undoubtedly see a much stronger price response over the coming weeks.
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The impacts of this will be twofold: some degree of panic buying will set in and artificially inflate the pricing in those origins still open for business; and the spread between Asian and U.S. origins will narrow to the point where U.S. will be a much more viable source of rice.
With a large anticipated new crop domestically, this should translate into a more favorable pricing scenario for the U.S. producer at harvest time. USDA increased its world market price estimate this week moderately, but further increases can realistically be expected in the coming weeks.
Domestically, growers have been continuing with their operations much has they have done for years. Apprehension is very high regarding the outlook for new crop but fortunately critical inputs such as fertilizer and chemicals have not been significantly disrupted to date.
Texas and Louisiana have planting well under way, with some areas already establishing a good stand of rice. The Delta remains wet but growers in those areas still have some time before planting gets behind schedule.
The price disparity between inputs and outflows are being well noted by producers who have a difficult time understanding why fuel prices have not fallen apace with the crude oil and why old crop inventories (few though they are) have not increased proportionately price-wise with demand.
In the futures market, the open contracts on the board have begun to converge more to the market fundamentals and away from the violent moves noted in the financial indices. The spread between new crop and old crop contracts continues to reflect the expectation of stronger acreage, while the price increases in new crop contracts are consistent with a higher anticipated demand at harvest.
While the market is still at the mercy of its larger cousins, rice has begun to find its own way. There are several important reports to be aware of on the horizon.
The first being the Prospective Planting Report, released at the end of the month. This will give the market a first glimpse into the acreage mix for the year and will initiate a market adjustment at that time.
The next report of note will be the April WASDE which will incorporate the findings from the planting report and should give the market a better handle on what the projected new crop balance sheet may look like.