Wet weather, yields and demand

Three factors influence prices and could help move rice markets from their current doldrums.

• By Kurt Guidry •

wet fields mississippi

Wet, rutted fields, like the one pictured here in Sunflower County, Mississippi, have slowed planting throughout much of the Mid-South rice belt. Depending on the year, rice planted through mid-May can still achieve more than 90 percent of its optimal yield potential, according to university planting date studies — photo courtesy Mississippi State University

There has been very little positive momentum in the rice market over the past several months. Cash prices in Louisiana are still being reported in the $17 per-barrel range (roughly $10.50 per hundredweight) and have been at that level for much of 2019.

Despite the release of the planting intentions report at the end of March being viewed as neutral to slightly positive, the market has not shown any reaction. Prior to the report, there was some concern that rice acres could grow in 2019 as a lack of attractive planting alternatives forced more acres to rice.

So when the report showed total rice acres falling by about 76,000 acres (2.946 million acres in 2018 compared to 2.87 million acres in 2019), there was some thought that the market would build positive momentum.

Unfortunately, that has not been the case. When factoring in the expected 2019 acres into the supply-and-demand projections for the 2019/20 marketing year, the reduction doesn’t seem to be enough, by itself, to drastically change the market outlook for rice.

Since the reduction in acres was fairly evenly split between long- and medium-grain acres, it didn’t create a significant advantage in the supply-and-demand picture for either one.

Three areas to watch

With very little change in acres from 2018 to 2019, price direction and movement for the 2019/20 marketing year will have to come from three broad areas.

The first is weather issues. Wet conditions this spring throughout much of the rice -growing area is creating some concern about rice acres being prevented from planting. As of April 15, 26 percent of the rice acres were planted, according to the U.S. Department of Agriculture.

This is down from the five-year average of 35 percent. Slower plantings than the five-year average was reported in every state except for Louisiana, which reported 77 percent of the acres planted versus the five-year average of 76 percent.

In Arkansas, only 19 percent of the acres were reported as planted as of April 15 compared to the five-year average of 34 percent. While planting progress can catch up in a hurry, this may bear watching. Any reduction of rice acres could help build some slight momentum in the market.

The second area is yields. Over the past three years, rice yields have been at or above trend line yields. Another year of trend line yields would likely push production and total supplies to levels that would question the ability of the market to sustain prices at higher levels.

However, with the slower pace of planting and the potential for a large amount of rice being planted at the end of the optimum planting window, we could see some impacts on yields that could help support prices.

The third and final area has been one with the most influence on prices over the past several years and that is overall demand.

The root of the situation has been the market’s inability to attract and capture sufficient demand to offset changing supply levels.

While total rice exports through April 11 are essentially the same as last year, they are still off by more than 13 percent from the five-year average from 2012 to 2017. Increased competition and higher U.S. milled rice prices continue to limit the ability to capture larger market share.

In addition, a recent increase in China’s exports of medium-grain rice has reduced the medium-grain market for U.S. rice and has dampened the positive momentum seen in this market earlier in the year.

Dog days of summer

Louisiana rice harvest

Photo courtesy LSU AgCenter

The bottom line is that, despite some small areas of optimism, it appears the 2019/20 marketing year will be very similar to what was experienced in 2018/19.

While total rice production should be smaller in 2019, much larger stocks to start the marketing year will leave total supplies at or above those experienced in the previous marketing year.

Examining several different scenarios for all rice and long-grain rice supply and demand fundamentals shows that ending stocks are projected to see only modest changes from the previous year. For stocks to fall significantly in the 2019/20 marketing year, the market would need to have yields below trend line levels, total demand at five-year highs and total rice imports at five-year lows.

Even with all of those factors, ending stocks would still only fall to levels seen during the 2017/18 marketing year when long-grain prices averaged $11.50 cwt ($18.63 per barrel) in the United States.

Given this outlook and projections for supply and demand for 2019, it appears that a logical price projection for the 2019 crop would be somewhere in the $17 to $19 per-barrel range ($10.50 to $11.73 cwt), with an outside shot at $20 ($12.35 cwt).

Slightly improving supply-and-demand fundamentals should keep the probability of prices falling below the $17 per-barrel range fairly low.

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.