Harvest in Arkansas has progressed smoothly up to this week, but rains have slowed things down a bit. Optimism remains in a return to normal, where field yields are good to excellent, and milling yields are average to down. Harvest is moving forward in Mississippi, with estimates as high as 70% complete at this point.
The rice supply chain is approaching a difficult season; the damage done to the ports on account of the Hurricanes, coupled with the inefficiencies resulting from Covid means that despite a smooth harvest, shipping product will me more difficult than in years past. The port problems are not isolated, but the Mississippi River and port systems have set the US apart as a reliable supplier; this will be one of the most significant long-term challenges the entire transport system will face.
Labor shortage, the availability of fertilizer for 2022 (urea) and price increases of inputs in general have some farmers rethinking next year’s planting intentions. As one veteran rice trader in Mercosur mentioned this week, “this market has a new set of rules and everyone is trying to adapt.”
Prices on the ground in Texas have prices at about $14.58/cwt over loan, and harvest has been all but complete for close to two weeks there. In Louisiana, bids are appx $13.58/cwt and harvest is complete. In California, harvest is rounding the corner to beyond 50% harvested. The market is strong in the west, with paddy prices trading with liquidity at $22/cwt over loan. Much like Arkansas, initial yield reports are above average, and milling yields are below average, albeit better than last year. However, it’s still too early to provide definitive results.
In Asia, prices are sideways, with a slight firming in Vietnam to the tune of $5 pmt up to $435 pmt. The thought for the slight increase is because on account of tight supply in first hands because the government buys rice from farmers for reserve, leading to higher domestic prices. Great news moving forward though, is that the Vietnamese government lifted the pandemic shutdown as of Oct. 1. This is a great first step in clearing up the log jam in Vietnam. India, however, continues to export at record pace with prices between $350-355 pmt.
A recent GAIN report on China reveals that rice production for MY 2021/22 is forecast at 150 MMT, and consumption to be 155.7 MMT. Consumption is 2.3 MMT higher than estimates, and can be accounted for because of increased feed demand. Reports would indicate that over 10 MMT of feed stock was sold between $200-$230 pmt to four Chinese State Owned Enterprises from Aug 2020-Mar 2021.
Official rice imports increased to 3.6 MMT, but unaccounted cross-border trade certainly increases that number. The US industry is still fighting for enforcement of the Phase 1 trade deals, where a market to China would be key to the US rice industry.
The most recent USDA Export Sales report shows net sales of 73,400 MT, down only 2% from last week, but up 73% from the prior four week average. Large shipments to Mexico and Honduras accounted for the majority. Exports of 61,700 MT registered an increase of 13% over last week and 32% over the four week average. Again, Mexico took the majority of exports.
In the futures market, the strength of the dollar may be pressing futures down a bit. Earlier this week, the dollar closed above key resistance, and dropped Nov rice futures a combined $0.28/cwt. Barge rate increases, fresh supply, and now possibly a strong dollar is combining to put pressure on futures. Average daily volume increased 21% up to 780, and Open Interest largely unchanged at 9,067.