On the ground, the only thing more pressing than harvest is Hurricane Ida and the aftermath. The destruction in urban populations is catastrophic, while damage to rural regions, and specifically the rice complex, is still being ascertained. We do know that some rice in Louisiana has been damaged and/or destroyed, but full effects remain unknown.
Port congestion will no doubt be a concern moving forward as well. This week in the Port of Lake Charles, the SLRF is loading a vessel of rough rice (27,500 tons) with a milling yield of 61/72 for Venezuela. Options outside of the Port of New Orleans have grain exporters shifting attention to Lake Charles and Houston. The South Louisiana Rail Facility is actively shipping rough rice by rail into Mexico this week.
Texas is on the downhill side of their harvest, with less than 25% remaining to get in the barn. The earliest of the early are cutting in Arkansas, and we look forward to having initial indications next week.
On the ground, paddy prices remain strong with cash offers even as new crop supplies are hitting the market. Louisiana is offering $13.50/cwt, Texas has bids around $14.30 +/- per cwt based on shipment dates. Arkansas, Mississippi, and Missouri bids remain unchanged at $14.50-$15, but those supplies aren’t available yet.
Shipping Crisis in Review
It is well known that the pandemic resulted in slowing down terminals around the world due to lack of manpower; this generated the initial port congestion from 2020. Then in 2021, the largest terminal in China was shut down, causing further disruptions and ripples through the supply chain.
COSCO, the Chinese shipping conglomerate and world’s largest container terminal operator, owns 51 container terminals around the world. The problem is that containers are not returning from the U.S. and Europe as they usually do, but are going directly to China, often empty, creating further disruptions.
It is expected these problems will persist at least through the first quarter of 2023, but the fact that the Christmas season is nearly here only augments the problems. For example, freight rates from New York to the Middle East were $1,300 in March 2020, and have ballooned to $7,700 in August 2021, a 592% increase. Los Angeles was $3,000, now $8,600, which is an increase of 717%.
Rice News on AgFax
Obviously, shipping companies are raking in record profits, and any new ship and/or container production won’t be online until 2023 as well, therefore this problem will persist.
These problems make rice trade, and the commodity trade in general, exceptionally difficult. The low margins associated with commodities often cannot afford the extraordinary price increases. The Federal Maritime Commission in the US, and equivalent bodies throughout the world, are mobilizing Advisory Committees in order to address these significant global concerns—not just in the name of trade, but in the name of food security.
The purpose of these Advisory Committees will be to focus on policies that relate to reliability, fairness, and the competitiveness of freight lines. It is our hope that some sort of resolution can be found quickly—there is sufficient rice supply to provide food security around the world—but getting it where it needs to be, when it needs to be there, at a price that can be paid, is an entirely different situation.
In Asia and specifically Thailand, this problem is coming home to roost. Shipments of Hom Mali have dropped on account of no workers due to COVID-19, and freight rates increasing by more than 5x in recent months.
This makes the price simply unaffordable due to logistics costs, therefore, preventing shipments to the United States, Thailand’s largest customer for Hom Mali rice. Prices are now $700 per ton, down from $900 per ton earlier this year. Prices for Thai 5% held mostly steady at $390 per metric ton, Viet 5% to just over $395 per metric ton, and India remained at $380 per metric ton.
Net sales of 49,500 MT for 2021/2022 were primarily for Haiti (15,200 MT, including decreases of 100 MT), Honduras (15,000 MT), Japan (12,500 MT), Canada (2,500 MT), and Saudi Arabia (1,400 MT). Exports of 38,600 MT were primarily to Haiti (15,200 MT), Japan (12,500 MT), Mexico (4,800 MT), Canada (2,200 MT), and Saudi Arabia (1,900 MT).
In the futures market, average daily volume was down 16% to 779, while Open Interest was up 2% at 7,870. The September contract dropped 1.95% to $13.055, while the November contract dropped in similar fashion, down 1.88% to $13.300.