Tuesday, May 28, 2024

Assuming stable U.S. rice acres for 2019, look for a repeat of the 2018-19 market

• By Kurt Guidry •

sunset over rice
Although there are some struggles still to overcome for the rice market, the bottom line is that the demand picture does look marginally improved.

The activity of the rice market has been markedly lower over the last several weeks and looks to have gone into its typical slowdown as we head toward the holiday season and the end of the year. Current reports place rice bids in Louisiana at the $17 per-barrel ($4.72 per-bushel or $10.49 per-hundredweight) level, which has been the prevalent price offer for the past couple months.

In addition, some buyers have stopped making bid offers at this time, which just adds to the overall quiet tone in the market.

History would indicate this quiet tone will likely remain until sometime after the new year when we hopefully start to see additional activity in the market. The question remains whether this additional activity will bring higher prices.

Unfortunately, other than improving the demand projections for medium- and short-grain rice, the latest U.S. Department of Agriculture supply and demand numbers really did not provide much spark for this market. Exports for medium- and short-grain rice were increased 3 million cwt in the December estimates. This significant change in expected exports is being largely driven by sharply lower production in Australia and Egypt. This should help increase U.S. export prospects for the remainder of the marketing year.

The improved supply and demand outlook for medium-grain rice has pushed prices to the $21 per-barrel ($5.84 per-bushel or $12.96 cwt) level. This brisk pace to exports is expected to continue to support medium-grain prices in the short-term and could even provide some minor price improvement.

Long-grain demand up, so is supply

Long-grain export numbers have also improved over last year. However, unlike with medium grain, long-grain prices have not been able to ride this momentum. A couple of reasons likely point to the inability of the long-grain market to push prices higher.

First, long-grain production and supplies are projected to be up more than 11 percent higher in 2018. While total long-grain rice demand is also projected to be up by 5 percent, ending stocks are still expected to exceed the level seen in 2016 when prices fell to less than $16 per barrel ($4.44 per bushel or $9.88 cwt). So despite the better demand outlook, it simply isn’t enough to compensate for larger supplies and change the overall supply and demand outlook for long-grain rice.

Another reason is the remaining uncertainty regarding exports despite its positive start to the 2018/19 marketing year. While the much-publicized Iraq purchases earlier this year have been a welcomed site for the market and have helped the pace of export sales, until these types of sales become more consistent, there will likely remain a degree of uncertainty about the long run sustainability of rice export sales. And without more sustained, reliable demand, it is difficult to have overly optimistic view of the long run potential of the market.

Demand pictures looks marginally improved

Although there are some struggles still to overcome for the rice market, the bottom line is that the demand picture does look marginally improved. This should help limit downside price risk and could conceivably help strengthen prices in the $18-$19 per-barrel ($5-$5.27 per-bushel) range after the first of the year. This would be particularly true if the market could become more comfortable with the direction of long-grain export demand.

Beyond that, price prospects for the 2019 production year will likely hinge on acreage and production. Examining projections for crop profitability in 2019 suggest relatively minor movement in rice acres. Simply put, there does not seem to be an attractive cropping alternative to pull rice acres away.

In fact, in some of the rice-growing areas, it is conceivable to see a slight increase in acres. The bottom line is that it seems unlikely that the market will see a significant shift in acres one way or another. Assuming stable rice aces in 2019 also likely suggests a very similar supply and demand situation and similar prices that were experienced in 2018.

Dr. Kurt Guidry is Southwest Region director and Extension economist with the Louisiana State University AgCenter in Crowley. He may be reached at KMGuidry@agcenter.lsu.edu.

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