Rice Farming

Rice Prices Stay Strong

Grains futures, Philippines’
re-tender fuel the market
  

By Gene Johnson

After some profit taking, the rice market took off again the first two weeks in April. The market is being fueled primarily by the grains futures market and the announcement of the Philippines’ re-tender under the GSM 102 credit program. The first week of April, the Philippines reportedly purchased 72,000 metric tons (mt) of U.S. long grain rice with $75 million of U.S. credit to be delivered May 15-Sept. 30.

USDA World Market Price
World Market
Price Value Factors
This Week
4/16/2008
CWT (BBLS)
Last Week
4/9/2008
CWT (BBLS)
Loan 2007/08
LDP
Long Grain
$21.72 (35.19)
$21.72 (35.19)
$10.12
$0.00
Medium Grain
20.95 (33.94)
20.95 (33.94)
9.4
0
Short Grain
20.93 (33.91)
20.93 (33.91)
9.4
0
Brokens
14.62 (23.68)
14.62 (23.68)
6.81
 
Calculations        
55/70 Long Grain
14.14 (22.91)
14.14 (22.91)
6.59
 
55/70 Medium Grain
13.72 (22.23)
13.72 (22.23)
6.19
 

Source: USDA WMP: April 16, 2008

The Philippine Agriculture Secretary says the county needs a minimum of 2.1 million mt of rice imports in 2008. Other sources put their needs at 2.4 million mt or more. To date, the Philippines have imported 1.1 million mt. The Philippines have asked Vietnam and Thailand to guarantee large tonnages, but neither will guarantee as much as needed. On April 17, the Philippines bought 325,000 mt from Thailand and Vietnam – 5 and 25 percent brokens at about $1,000 to $1,200 per mt. They didn’t get the 500,000 mt they wanted. That’s going to be the problem. There is not enough rice to go around.

Iraq received a tender for 100 mt. They opted to buy Thai rice.

Cash prices are up sharply with No. 2-4 percent now quoted at levels that reflect $790-800 mt bagged FOB vessel or $775-780 basis bulk. And the Philippine tender is likely to move prices higher yet. Cash bids for rough rice increased again the second week in April, with bids FOB farm for long grain reported in south Louisiana at $32/barrel ($19.75/cwt); in southeast Arkansas at $9/bushel ($20/cwt); and for medium grain in California at $11.35 to $11.40 over loan price.

In south Louisiana, there is not much unsold rough rice. Bids on new crop moved up to $25.50/barrel ($15.74/cwt) with very light contracting. In Texas, old crop rice is virtually sold. New crop bids for long grain are reported at $8.50 over loan, with few takers.

USDA made no changes in the basic supply/demand numbers in April’s report. USDA did increase its estimate of average price of all types of rice for the 2007 crop to $12.20/cwt, compared to $9.96/cwt for 2006 rice.

The bullish trend continues in Thailand as fresh trading is virtually non-existent because of lack of offers in the local market. Defaults, renegotiating of contracts and buyouts are quite prevalent in the midst of this never ending upward spiral in prices. Major exporters in Thailand continue to quote rice on a hand-to-mouth basis, with quotes steadily rising, now near $800/mt for white rice 100 percent B and over $1,000/mt for fragrant.

There is no formal export ban in place; however, for all practical purposes it exists in principle. The situation is not altogether different in Vietnam.

However, there is a partial export ban in place for April/May shipment. The one glaring exception is the Philippines, where the Vietnamese government has pledged support to the Philippine government.

The world rice market continues in a state of near panic, with reports of widespread civil unrest over high consumer prices and food shortages. Riots are occurring in Haiti and Africa.

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