Rice Market: Positive Response to WASDE Report

    Trading last week was focused on Thursday’s supply/demand report from USDA.  The rice market’s reaction to the May WASDE was favorable as new crop futures closed 10 ½ cents higher Thursday.  As anticipated, long-grain ending stocks are projected to tighten in the 2022 marketing year.

    The May WASDE includes the first official new crop supply/demand projections.  As a starting point, these generally include the planting intentions from the NASS March Prospective Plantings.  In the May 22/23 balance sheet, USDA did not include planted and harvested acres in its’ initial long-grain projections.

    However, they did footnote in their “All Rice” balance sheet “planted acres reported in March 31, 2022, Prospective Plantings”.  Given that, we can assume long-grain planted acreage is 1.943 million.  Using the projected percent harvested from USDA’s February Ag Outlook, estimated harvested acres could be 1.904 million.

    To arrive at 22/23 Production of 140.9 million cwt. (Table 1), the average yield would be roughly 7400 pounds per acre, which is right in line with the 5-year Olympic average of 7402 pounds.

    Table 1.  U.S. Long-Grain Supply Demand.

    Unit: million cwt.

    2020/21

    2021/22

    2022/23 Proj.

    May

      Harvested Acres (mil.) 2.3 1.94 1.904
      Yield (pounds/acre) 7422 7471 7400
      Beginning Stocks 16.9 29.7 21.4
      Imports 27.4 28 30
      Production 170.8 144.6 140.9
          Supply, Total  215.1 202.4 192.3
      Domestic & Residual  120.2 117 113
      Exports  65.1 64 61
          Use, Total 185.3 181 174
      Ending Stocks 29.7 21.4 18.3
      Stocks-to-Use % 16% 11.8% 10.5%
      Avg. Farm Price ($/cwt)  $ 12.60 $        13.80 $         15.50
      Avg. Farm Price ($/bu.)  $   5.67 $          6.21 $           6.98

    Source:  USDA affiliated agencies, May 2022.

    The old crop (21/22) ending stocks were increased by 2 million this month, making the 22/23 beginning stocks 21.4 million.  Also, new crop imports are projected to be record large at 30 million cwt.  The net result is total supplies of 192.3 million, down 10 million from 21/22.

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    Given lower production, tighter supplies and a higher price outlook, USDA projects a 7 million cwt. reduction in usage in 22/23 to 174 million cwt.  Domestic use is expected to drop 4 million from last year, while exports could be down 3 million cwt.  Exports of 61 million would be the lowest since 1996/97.

    This leaves the new crop long-grain balance sheet with ending stocks of 18.3 million and a stocks-to-use of 10.5 percent (Fig. 1).  The projected stocks-to-use for 22/23 would be the lowest since the 9.9 percent seen in 2019/20.  USDA projects the average long-grain farm price for the 22/23 crop to be $15.50/cwt or $6.98 per bushel.  That would be the highest average farm price on record back to 1982/83.

    U.S. Long-Grain Ending Stocks and Stocks-to-Use Ratios

    Fig. 3.  U.S. Long-Grain Ending Stocks and Stocks-to-Use Ratios. Source: USDA, Economic Research Service, 2022. Click Image to Enlarge

    After wide-ranging trade on Tuesday that dipped below $16.80, the September futures chart looks more constructive as we close out the week.  This week has provided the weather the Midsouth has been waiting for.  Monday’s Crop Progress will reveal a massive leap forward in planted acres.  However, the May WASDE provided long-term support for the rice market with tight stocks and record prices in the outlook.

    CME Rough Rice Futures, September 2022 daily chart

    Fig. 2.  CME Rough Rice Futures, September 2022 daily chart. Click Image to Enlarge




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