As a commodities broker, Charles Ross closely watches moving average lines, which show the average price of rice over specific periods and can be used to view underlying market trends.

During the past few years, the lines have continued downward, and the price growers receive continued to slide. By combining what buyers were paying for the crop with the loan deficiency payment (LDP), growers were lucky to receive $3 to $3.25 per bushel.

Recently, the moving average lines have shifted directions and are moving upward, something that Ross hasn=t seen since July 1997 when rice was trading $4.36 per bushel.

As of mid-October, rice wasn=t trading at $4.36 per bushel yet, but the upward trend still has Ross excited.

AMost people I talk to still can=t believe rice will go higher,@ says Ross, who works for the Rosenthal-Collins Group in Cordova, Tenn. ABut I=m pretty bullish.@

Growers have to keep in mind that rice is traded worldwide, and world production is forcast at 397.3 million tons, about 1 percent below the record 402.2 million tons of last year, says Nathan Childs, a rice economist with the U.S. Department of Agriculture=s Economic Research Service. In its Oct. 13 report, ERS pegged ending world end rice stocks at 58.6 million tons.

For example, India--one of the world=s largest rice producers--is expected to have a record crop this year, and the Philippines is predicted to have a good crop. Although rice stocks in China are expected to decline, the country should still have an adequate rice supply, Childs says.

Many of the South American countries, which during the past few years have had to import large quantities of rice because of an El Nino-induced drought, should also have adequate supplies.

And Childs, who writes ERS= monthly Rice Outlook Report, doesn=t see anything on the horizon that would increase prices substantially.

AThere isn=t any price strengthening factor out there right now,@ Child says.

David P. Anderson, an agricultural economist with the Texas Agricultural Extension Service, agrees.

AI don=t see any big yield problems somewhere else giving us some big rally,@ Anderson says. AAt least the stocks are little lower on the long grain, but overall stocks are still high for all grain types of rice.@

The USDA=s September Rice Outlook Report cut in half the amount of long-grain rice it said U.S. growers and suppliers would have on hand at the end of the 2000-01 marketing year July 31, 2001.

Originally the USDA projected ending long-grain stocks at 29.2 million cwt. The latest report pegs that at 13 million cwt, making it one of the tightest supplies since the agency began reporting those figures in 1982. Combined medium- and short-grain ending stocks are 12.5 million cwt., well above the 10.4 million cwt of a year ago. A record California medium-grain crop is responsible for much of the increase.

The USDA reduced ending stocks for all varieties of rice from 39.5 million cwt to 26.7 million cwt. Part of the decrease is due to the USDA decreasing its estimate of the number of acres planted.

Although harvested acres also will decline to 3.08 million from 3.25 million, the USDA says some of the production shortfall will be offset by higher yields. Altogether, the USDA estimates U.S. growers will produce 192 million cwt of rice this season, the third highest in history.

AIt=s important to look at the total ending stocks, and it=s probably a bigger number than anybody would like to see,@ Anderson says. AIt=s not as big as last year but it=s still a large crop, and we still need strong export market. And that a has a lot to do with what happens in the rest of the world with the major importers and exporters.@

One area of the world that Ross and Dennis DeLaughter, president and owner of Progressive Farm Marketing in Edna, Texas, are watching is southeast Asia, where several recent storms have taken a toll on crops.

AI think the concerns of Asia are definitely there,@ DeLaughter says. AWe’re talking about a loss of 5 to 10 percent production, from what we=re hearing. It looks like there=s going to be some upward pressure.@

DeLaughter says he also believes the USDA may have been overly conservative in estimating rice stocks, U.S. exports, and supply and demand. During the past few years, the market has been a buyers’ market. But with the current ending stock estimates of 13 million cwt, that could change.

Should demand grow or actual rice stocks shrink, the tide could turn to a sellers= market. AI think we are on the verge of making that switch,@ DeLaughter says. AThere=s no room for additional demand.@

Because of that, DeLaughter says Chicago Board of Trade future prices could possibly increase another 10 percent and settle in between $7 and $7.50 cwt.

AI don=t think we=re going to see any $9 [cwt] rice, but I don=t think we=ll see $5.25 or $5.50 either,@ DeLaughter says.

What happens with food and medical aid to Iran and Cuba as well as repercussions of recent terrorism in the Middle East could also affect world supply and demand.

But increasing world prices can be a two-edged sword. The USDA establishes something similar to a target world rice price. The LDP makes up the difference between the target price and what rice is actually selling for on the world market. Should the actual selling price rise, the LDP decreases. During past periods of high rice prices, growers received no LDP because the actual selling price was greater than the USDA target price.

Despite large world supplies, Ross remains optimistic, and cites the reentry of funds--akin to a commodity mutual fund--as one reason.

Players in commodity trading apparently are buying rice futures looking to make money on speculative hedging. The last time Ross saw the funds participating in the rice market was four to five years ago when prices also were on the rise.

The result will be more speculation and volatility in the market.

AI think you=re sitting here on a keg of dynamite waiting to go off,@ Ross says.