Rice Market Update: New Sales to Iraq Pending Confirmation

    Price drops in Asia continue, and it’s almost confusing given that Thai prices are now right in line with India. Last week we discussed that despite the drop in Thai and Viet prices, Indian prices have remained resilient, and that trend continues.

    With all origins registering below $400 pmt this week, the question now is if Indian prices will drop further, or if $385 pmt will be the true bottom and an influx of purchases may push Thai and Viet prices back up. Though it hasn’t happened yet, the expectation is that Filipino interest will find its way to Thailand instead of Vietnam with prices being as low as they are.

    New supplies hitting the market provide grounds for this temporary depression, and it would make sense for the Filipino purchasers to take advantage of the moment.

    Thailand may be the only option for the Philippines, as COVID resurgence in Vietnam has more than 3 million Vietnamese back to a shelter-in-place status as of July 19th. COVID-19 fears are again on full display on the world stage with the Olympics beginning this week.

    While the global supply chain and individuals are better prepared to deal with a second round of lockdowns, it does not bode well to efficiency and rising costs in an already sky-high logistics marketplace.

    Last week we reported on two consecutive record crops from India and their record shipping numbers that have exceeded all expectations. The weak monsoon is likely to prevent a third year of records, as 28.4 million acres of rice have been planted this year, compared to last year’s number of 31.1 million acres; a decrease of nearly 10%. Monsoon rains were 46% below average as of July, and a total of 5% below-average rainfall as of June.

    Turning to the Western Hemisphere, the protests in Cuba provide a glimmer of hope for the U.S. rice trade, as this enormous market only 90 miles off the coast has been a political conflagration for decades. However, the largest anti-communist protest by Cubans in over 30 years has put the Cuban-U.S. relationship on center stage.

    This creates an opportunity for the U.S. to step in, specifically with food aid, to assist this beleaguered and disenfranchised nation. The Biden administration has yet to make an official position statement on the issue, but opening up any trade with Cuba will be a huge win for the U.S. rice industry as Cubans possess a per capita rice consumption of nearly 150 lbs per year.

    While a deal with Cuba is a hope for the future, a tangible deal was finally struck with Iraq this week—and a solid one at that. Two bulk vessels at 30,000 metric tons each were booked for milled U.S. long-grain rice. It has been a long time coming, and more than necessary for the milled rice market.

    The political problems in Haiti have stalled exports, and this new Iraqi business is the breath of fresh air the U.S. long-grain industry needed to thrive into harvest. This solidifies a change in the undertone of the market; the wet weather and poor growing conditions have provided some support for the shorter-than-expected crops, but exhausting 60,000 metric tons of supply to Iraq is the shot in the arm that was needed.

    Comprehensive Progressive Agreement for Trans-Pacific Partnership Concerns Mexico & U.S. Rice Industries

    While the United States pulled out of the “Trans-Pacific Partnership” (CPATPP) agreement negotiations at the beginning of the Trump Administration, Mexico and a number of other countries did not. Among the eleven countries that signed the agreement in March of 2018, making it effective on December 30, 2018, are Vietnam and Mexico, along with Canada, Peru and Chile in the Western Hemisphere.

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    The bottom line effect on rice means that Vietnam, well-known for low prices and non-compliance with WTO regulations, will have duty-free access to Mexico, the most important long-grain market for U.S. rice farmers, after only a 10-year phase-in period.

    This week, Pedro Schettino, owner of Schettino Hermanos rice company and a major buyer of U.S. rice, visited Louisiana where he met with Governor John Bel Edwards and South Louisiana rice farmers.

    “Everyone in Mexico and the United States, both rice farmers and mills must realize the devastating effect this will have on the rice industries of the two countries,” informed Mr. Schettino, adding “we must find new approaches to maintaining our unique rice trade relationships.”

    After a visit with the Louisiana Governor and Mark Pousson of the Louisiana Independent Rice Producers Association (LIRPA), Mr. Schettino visited the South Louisiana Rail Facility in Lacassine and area rice farms where he met with numerous farmers and Dwight Roberts of the US Rice Producers Association (USRPA).

    “I applaud Mr. Schettino’s visit and initiative regarding TPP and calling attention to what should be a very serious concern to all long-grain rice farmers and mills in both countries. His efforts on behalf of all Mexican rice farmers and millers is commendable”, says Roberts.

    “Research efforts by the USA Rice Federation clearly indicate a range of trade-distorting practices that exceed WTO obligations, so it’s imperative that meaningful actions are taken,” Roberts added.

    Pedro Schettino also visited Supreme Rice Mill during his visit to Louisiana which was hosted and coordinated by both LIRPA and the USRPA.

    Full report.

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