Prices could continue to move higher after the first of the year

By Kurt Guidry
LSU AgCenter

The fundamental supply and demand situation was provided a small boost with the release of the USDA’s November supply and demand report. For much of 2012, the rice market has been fairly stagnant as lackluster demand has limited momentum. However, signs of improving demand and prospects for additional future demand are starting to firm up the outlook for total rice demand and leading to improvements in the overall supply and demand balance for rice.

While the lower projections for 2012 rice yields in the November report will help ease some of the supply burdens facing the market, the most significant change in the report was increasing total demand led by export demand. The USDA increased its export expectations by three percent in the November report from the previous month. Lower production in India during the 2012/13 marketing year is expected to severely curtail their export sales and should hopefully improve the longer run prospects for U.S. rice exports.

Stronger Export Sales And Potential

In addition, to improve prospects for future export demand, there have also been signs of stronger export sales over the last several weeks. While cumulative rice exports through Nov. 1, 2012, are down about eight percent from last year, this compares to being down 17 percent at the start of October and down 25 percent at the start of September. Also, outstanding rice export sales are currently up 19 percent from last year and total rice export commitments are up three percent.

Other developments in October also point to the potential for additional export demand moving forward. First, after several months of negotiations between USDA’s Animal and Plant Health Inspection Service (APHIS) and the country of Colombia on terms of entry for rough rice exports, the first shipments of rice arrived in Colombia on Oct. 17, 2012. This is projected to be the first of several shipments that could materialize by the end of 2012, with potential for additional trade in 2013.

Another development that warrants attention is the potential of trade with China. In October, APHIS received a draft protocol from the Chinese government on requirements for importing U.S. milled rice. This is also being taken as a sign of potential business that could materialize with the world’s largest consumer of rice.

Louisiana Cash Prices Up Slightly

With the prospects for improving demand and for expanding future demand, there is a much more positive tone to the market. While cash prices have started to slowly react to these improving conditions, they are still far from levels that will likely be competitive with other commodities for acres in 2013. Early projections for the 2013 production year see additional rice acres shifted into competing commodities. In areas of the rice-growing region where corn and soybeans can be competitively grown, the high prices currently being seen for those commodities are expected to pull acres out of rice.

Lower acreage and lower production in 2013 in combination with improved prospects for demand could finally provide the needed spark for this market to see real price improvement.

Cash prices in Louisiana are currently being noted at the $14.80 per hundredweight ($24.00 per barrel) range. This is up slightly from the level that prices have seem to be stuck in for the last several months in the low $14.00 per hundredweight ($23.00 per barrel) range. Additional export activity during the remainder of the year should help support prices at these levels and could push prices marginally higher as local supply levels tighten, particularly of high-quality rice.

If demand prospects continue to show their signs of improvement, prices could continue to move higher after the first of the year once the market begins to focus more squarely on potential 2013 production. With the new crop 2013 futures contract (September 2013) currently trading at roughly $0.55 per hundredweight higher than nearby futures, it appears the market is anticipating lower production and lower overall domestic rice stocks in 2013.

While global rice production and competition will continue to be an important factor in the overall direction of prices, the improving supply and demand situation expected for the domestic rice industry should point to better prices moving forward. Certainly prices in the $15.00 – $16.00 per hundredweight ($24 – $26 per barrel) would not be out of the question given the current outlook and the potential of higher levels if further supply or demand side stocks materialize.

Kurt Guidry is a Professor in the Department of Agricultural Economics & Agribusiness, LSU AgCenter. Contact Guidry at

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