September rice futures traded mostly lower this week, following a broader ag market selloff. Cotton and grains offered no support to rice futures and the U.S. dollar is trading near 20-year highs. The chart below is a good example of the inverse relationship among the U.S. dollar and rice futures.
The blue line represents the September ’22 rice contract, losing about 2.6% over the past 2 months. The black line is the U.S. dollar, gaining about 2.5% over the same time period. The U.S. dollar is currently trading at the highest levels since December 2002. This does not improve our competitiveness in global export markets.
Speaking of outside markets, recession fears have triggered selling across nearly all ag commodities and ag company stocks. Nathan Rothschild, 19th-century British financier, is credited with saying “the time to buy is when there’s blood in the streets.” Much blood has been spilled this month for sure.
As of Thursday’s close, rice, corn, and soybean futures had lost 6 to 8% in value this month. Wheat is down 14% and cotton is down 17%. It seems everything turned lower this month except diesel. NYMEX diesel futures have gained about 35 cents this month. With the nearby contract trading around $4.35, diesel prices have more than doubled over the past year—up 104%.
Key technical levels of support have broken down for many ag commodities this week. When this happens it oftentimes leads to additional (and sometimes very rapid) speculative selling. For rice, the 20-day and 50-day moving averages have failed as support. We now turn our focus to the 100-day moving average.
For the September contract, the 100-day moving average sits at $16.23 (red line in chart below). This is a universally watched technical trading level. Any trading below $16.23 would likely trigger more selling. Watch this price level closely in the upcoming week.
Next Thursday, USDA will provide the June 30 Acreage and quarterly Grain Stocks reports. Expect volatility as traders and USDA try to pin down June 1 planted acres. The current March “planting intentions” number for Arkansas rice acreage is 1.191 million—2% below last year. Of the total, long-grain makes up 1.08 million and medium grain is 110,000 acres.
Rice News on AgFax
For the week ending June 19, the overall condition of the U.S. rice crop at 72 percent good-to-excellent is slightly lower than last week and last year. This is largely driven by Texas and California. At 25 percent, Texas reported the smallest share of its rice crop rated good or excellent. Note in the table how crop conditions in Texas and California also show the largest declines from a year ago.
For California, the western half of the Sacramento Valley is faced with sharp reductions in irrigation water this year from the Lake Shasta reservoir. Normally, California would have around 450,000 acres of rice. This year, industry sources estimate the state’s total will not exceed 250,000 acres.
At 83 and 81 percent respectively, Louisiana and Arkansas reported the largest percentage of the crop rated as good or excellent.
Table 1. U.S. Rice Condition, Percent Rated Good or Excellent.
Week ending June 19 (%)
Previous Week (%)
Last Year (%)
|Source: USDA, NASS.|