The U.S. rice industry has been through the wringer this year that makes last year look like a drizzly cakewalk. The problem last year was the worst rains in a century in Arkansas. This year, it is the highest record nighttime temperatures in the upper Delta. The situation is unfortunate, but nobody’s fault – no matter how angry it makes you.
Much of the rice is chalky and pecky and sort of crumbles in a hard-milled sample. In the first few days of November, low millers now are looking even lower. All of this comes mostly out of the farmer’s wallet; hence, the anger.
Math Gives Clear Picture
For example, perhaps a farmer needs $13.50 per cwt average to grow rice this year with low yields and has to sell half his crop for less than $10 per cwt because the milling yields are terrible. Then mathematics says he probably needs at least $15 to $17 cash on the other half just to break even. That is why, on Oct. 11 in Singa-pore, I forecasted $15 to $18 futures. With a three-dollar basis (cash-futures), that is a forecast of $12 to $13 cash rice, which still leaves this farmer in the red – big time.
The Gulf Coast lost field yield and some milling yield but generally got off fairly light versus farmers in the upper Delta. We can get angry or get even, not with each other or buyers, but with the market itself. You need to get a grade on all your rice and figure out what you have.
Sell Into Two Markets
You need to sell into two markets if you can. One is low milling and the other is normal or high milling. It is entirely likely you may need to wait months to sell your low-milling rice. It may not even sell for $10 per cwt. Asia will determine the price of that off-grade rice. That is why you should be careful how you sell your good rice. It needs to lower your losses on your bad rice. Remember this: If your milling is 45/65 and futures are full of 60/70 rice receipts, then futures and low milling cash rice can part ways. We are trading a high quality futures in a low quality year.
If you do not understand what I just wrote in this article, find someone who does. You deserve a price above the bottom quartile of the market. Forgive Mother Nature and listen to Father Market, and you will get through this nightmare okay. Do not, however, listen to some grain guy who has never been to Asia and does not know what a rice mill does to rough rice. I was a rice miller for 18 years.
I just got back from Asia where I ran a world rice conference where 2010 was like the last two years in Arkansas rolled into one. Asia got hammered on its rice crop. I know. I saw it two weeks ago. Read my speech at www.firstgrain.com. It costs you nothing but a few minutes of your time. Notice where the market was when I gave my price forecast on Oct. 11 and where the market is today.
To learn more about USRPA, visit www.usriceproducers.com.