Rice Farming

Who Let
The Bulls Out?

All grain prices, including rice, point to a strong market

By Gene Johnson

The U.S. rice market continues on a bullish trend line, as are all the grains. The overall short supply/demand ratio for rice globally is really driving prices. Total exports so far this marketing year lead last year’s pace by 28 percent.

The surge in exports occurred because a tremendous amount of forward buying was made by astute offshore buyers, who read this market correctly. It also points to how fundamentally strong the market truly is.

The mills are quite busy through February and into March, primarily on old sales to Haiti and West Africa. Also, Iraq has floated a fresh tender for 30,000 metric tons (mt) closing Jan. 27th. They may well buy more than the 30,000 mt as their demand is much deeper than that.

Most paddy rice bids fall on deaf ears
Prices for No. 2 to 4 percent milled rice are steady to firm with quotes ranging from $545-555 per mt bagged FOB or $520-530 per mt basis bulk. As far as the paddy market is concerned, shipments continue on a regular basis (both old and new) to Mexico and Central America well into the second quarter of 2008. Prices for paddy rice are very firm with bids reflecting $315 per mt FOB NOLA. Most bids are falling on deaf ears as growers’ ideas are some $10-15 higher.

In south Louisiana, bids for long grain were raised by $1/barrel to $21/barrel ($12.96/cwt) for basis No. 2/62/70 FOB farm with shipment within four weeks. Light sales were reported. In Texas, bidding for long grain continued at $6.25 over loan price for package-quality rice and $6.00 over loan for other types, with no selling being reported.

In Delta areas, high bids for long grain were reported at $5.60/bushel ($12.44/cwt) FOB farm basis No. 2/55/70 for quick shipment. A few sales were reported.

Many indicate that Delta farmers have gone strongly for wheat, which is expected to be followed by soybeans. There is also a strong interest in milo instead of corn. The high cost of nitrogen may shift additional acres out of rice and corn in the Delta.

Long-grain carryover projected to drop
In the supply/demand estimates issued Jan. 11, USDA was bullish for all grains. For rice, USDA was more bullish for long grain, with projections that the long-grain carryover will drop by July 31, 2008 to 11.7 million cwt, down nearly 60 percent from the carryover of 28.5 million cwt estimated at July 31, 2007. The new carryover estimated for 2007/08 long-grain crop is near the minimum needed to provide for domestic and export needs during the transition from old to new crop supply.

The long-grain market continues strong, with export sales running well ahead of usual, pointing to a minimum carryover for long grain at the end of the market year. The increasing supplies that are now being harvested in Asia may slow or stop market increases for awhile. However, with unsold supplies very low and a long wait for the new crop harvest, there is likely more upside market potential.

Gene Johnson is a professor of agricultural economics and agribusiness with LSU AgCenter.