RICHARD HICKS / R.E. HICKS GROUP LLC AN NFA REGISTERED INDEPENDENT IB.
Welcome to the new year. Hopefully, during 2026 we will have a better season, yet from what we have seen so far that certainly seems to be somewhat doubtful. We seem to be on the same trajectory as last year, but I digress. We will avoid focusing on all the geopolitical implications. That is very difficult for me as I am fascinated by the condition the world is in. I have covered that at nauseum for quite some time. We will start by looking back at last seasons’ productions numbers. Fortunately, we have the folks at the USDA that provide us with all those figures on a regular basis. According to the USDA total production is projected at 207 .3 million cwt. Luckily or unluckily this production drove priced to the lowest levels since 2017. Certainly not a winning formula for success. Abundant global supplies have weighed heavily on prices for some time. Even with the less than anticipated harvest, our numbers are still daunting. We have seen a modest increase in price which for some reason has motivated the armchair experts to comment prices are on the move.
In anticipation of this article, I took a quick look at a few of our competitors, and it does not appear there is going to be any attempt at slowing down their efforts to increase production. Let us face it, it is easier to increase agricultural production than it is to build a microchip factory. This has been and will continue to be our biggest problem. They are not hamstrung by water scarcity with higher drying and storage costs or government regulations that seem to increase endlessly. They simply carry on.
Now that I have given you the Sulphur time for the molasses production was not as large as originally projected and as I have said for many years, lower production is only a problem if it is on your farm. Markets anticipate and generally front run the news. What I mean by that is the markets “knows” we had lower prices before the news was released and since then I cannot say it has been good. It does seem the bloodletting as abated. This could be, and indication of prices consolidating in an attempt at a bottom. I have had an opinion for many years that bottoming is usually a process and not necessarily an event. While this is a generalization, I have seen many markets go fallow for some time before moving to higher levels.
Moving on, I want to cover some of what I consider to be some glaring inconsistencies in “our program”. I read some time back and perhaps I misread, but I believe we do export a significant percentage of our crop I believe in the 40% to 50% range. This of course is at the same time we are importing a significant amount of rice from foreign countries. I do not know if this is by trade agreements or treason, Personally I favor the latter. You will never convince me the America first is a bad effort. Amazingly our good friends to the north (Canada) just inked last week a trade deal with the Chicoms. Armed with the knowledge Chinese never do nothing for nothing somehow, I feel the Chinese will get the better end of the deal. You do business with the devil you get what you pay for.
I read a little information coming from other farmers around the world about the new crop season. Looking back at last season, the comments by producers were interesting. It appears they were plagued by higher input costs, limited access to credit, increased.
Mechanization they can ill afford and a lack of market knowledge. This has been somewhat offset by many of the Asian and African countries returning to the market because of the many concerns about supply chain disruptions due to the increased tension worldwide. A big pile of rice is only perception. This apparent abundance exists only in the minds of the end users. If they are comfortable with their coverage, they will sit on their hands. This perception can disappear in an instant if certain conditions change. It appears some of the pricing has been in the short run indicating to me the end uses want to extend their commitments a little more rather than chasing the price if conditions change. This is somewhat encouraging from an economic perspective. Many people have a somewhat confused idea about the function of the markets. Economically, they have a function. They are simply a price discovery mechanism. Contrary to common belief, they are not there for people to chase. Markets are there to ration supply in an up move and to induce demand in a down move. If rice prices are beginning to stabilize in negative supply demand outlook and if end users are starting to increase their coverage, this could be perhaps the beginning of a better outlook for domestic producers. We are still a long way off from prosperity, but we may be seeing some hopeful indications that we may be turning the corner. True producers all over the world are going to continue to seek the best yields possible. That is a fact we have seen for centuries and a trend that is not going to stop. Agricultural production seems only dependent on the whims of mother nature too little rain, not enough rain is a constant. That will be with us forever. Once in a great while we do see the great white whale in a demand market. These events many times come off a period of abundance like we have now and end up in a firestorm. We certainly have the foundation for it now as food is a weapon. It only takes a spark, and demand can change the outlook quickly. I have said for more years than I can to think about. It does not matter how much you produce it matters how much you consume. If you are producing one cwt. of rice and you are eating two. Guess what the price is unlikely to get cheaper. Maybe just maybe we are on bedrock as we speak. ∆
RICHARD HICKS IS THE MANAGING DIRECTOR OF THE R.E. HICKS GROUP LLC AN NFA REGISTERED INDEPENDENT IB.
I can be reached at 618-301-2244, 618-363-0252 sat phone 1-254-219-7336.
Note: Past Performance Is Not Indicative Of Future Results.