Arkansas Rice Growers Association

A new marketing year dawns this week with some positive annual export figures although the weekly numbers were less than impressive. Asian prices continue to weaken and the futures seem to be following suit. Cash prices bids are out there, but only after some rice begins to trade will there be much response. In summary, we are in much the same boat as we have been for the last few weeks.

Export sales, as reported by USDA, were significantly off this week as we enter the new marketing year for the 2008 rice crop. The total sales figure was a net REDUCTION of 29,700 MT for the week after purchases by the United Kingdom (1,700 MT of long grain milled), Turkey (1,300 MT of medium grain), and Benin (1,100 MT long grain milled) were widely offset by sales decreases for Iraq (30,000 MT long grain milled) and Belgium (2,800 MT long grain milled). This figure is down from last week’s 37,600 MT. A total of 612,300 MT of rice were carried over into the new marketing year. From the vessel loadings standpoint, the figures were much better with 55,600 MT reported from the week which is about 80% more than last week’s 30,900 MT. Primary destinations for this week’s volume were the Philippines with 14,400 MT of long grain milled); Guatemala with 6,300 MT of paddy; Saudi Arabia with 6,200 MT of long grain milled; Ghana with 6,000 MT of long grain milled; and Venezuela with 4,800 MT of paddy. The year end export numbers were reported to be 3,616,400 MT, which is up about 16% from 2007. Primary destinations for the shipping during the year were Mexico (855,300 MT of mostly paddy), Japan (339,900 MT of long grain milled), Haiti (279,000 MT of long grain milled), and Iraq (188,600 MT of long grain milled).

As was mentioned earlier, we have entered into the new crop year from a USDA standpoint. The new prices are $17.33 per hundredweight for long grain rough and $17.48 per hundredweight for both medium and short grain. These figures are based on a milling yield of 57.41/11.39 for long grain and 60.39/8.90 for medium and short grain. The loan rate for all classes is $6.50.

The cash market remains very quiet as the harvest continues across much of the South. Texas, which successfully dodged the majority of Tropical Storm Edouard, is seeing bids of a flat $17.50 per hundredweight ($11.00 premiums) as well as the $16.50 per hundredweight ($10.00 premium) with full escalation until December. Not much rice is reported to be trading at this level as a significant portion of the crop has already been forward contracted earlier in the year. Southern Louisiana is seeing bids in the $15.00 per hundredweight range ($24.19 per barrel) for immediate delivery while there is also a $17.10 per hundredweight ($27.58 per barrel) area for September delivery. Some small volume is reported to be moving at these levels. The Delta has been stable over the week with no change in bids from the last report. Current bids remain at around $16.00 per hundredweight ($7.20 per bushel) with no action reported.

Asian prices softened again this week on falling demand with Thai 100%B now quoted at $720 per MT fob vessel. The Vietnamese 5% is held by a Minimum Export Price (MEP) of $750, but traders have offered some volume at $560 per MT fob vessel. The market is highly out of whack in this region and the importers are watching closely and staying out of the market. Meanwhile in India, indications remain that they will not lift the export ban for rice as the Indian Government suggested it might earlier in the year. The Ministers recently met to discussthe stocks and the official ruling is still pending.

Futures continue to lose ground on falling Asian prices and no significant volumes of cash rice to trade, and this week was no exception. After Monday’s open at the bottom of last week’s range, the market fell $0.32 to continue last week’s decrease. A slight rally on Tuesday failed to recover any significant ground (even though the market closed up) and Wednesday’s trading saw the market fall another $0.34. A minor market rally on Thursday stayed within the previous day’s range, which was again lost during Friday’s session. The bright news is that the market should be getting close to a bottom (although there may still be a little way to go before hitting it). The trading range for the week was $0.59 on an average daily volume of 1,044.8.

Slightly softer and slightly slower is the name of the game in the market this week. Very little has changed over the past few weeks as more time is needed to produce enough volume to trade. If storage is not a problem, much of the new crop will be held for the stronger prices that must come in order to cover production costs. Domestic futures keep spiraling downwards as Asian prices continue to soften, and it will likely take some substantial market movement in this region before prices will begin to turn around. As we mentioned earlier, much of the new crop has already been contracted so significant market moves may be delayed until the stocks are consumed. A bearish sentiment is still obviously in the market, but if the global market news is to be believed, then long term fundamentals would still seem to be bullish.

Excerpt from The Rice Advocate Volume 5, Issue 33 - August 8, 2008