Year-end doldrums mean little potential for prices to climb until after the start of the new year.
By Kurt Guidry
The rice market appears to be stuck in a sideways trading pattern with little indications of significant moves in either direction. And the release of the U.S. Department of Agriculture’s December supply and demand report did little to change this current tone of the market.
The December report made only minor changes to the overall supply and demand dynamics of the rice market.
Total rice exports were reduced slightly, which led to an equal increase in expected ending stocks. This reduction in demand seems to reinforce the thought that the increase experienced in prices this year has predominately been a function of lower supplies and not a result of improved demand.
This inability of demand to add to the momentum created earlier in the year by lower production and tighter supplies has led to prices stalling over the last couple of months. Now, with the market going into its normal hibernation as the year comes to an end, there seems little potential for prices to make any significant move until after the start of the new year.
Larger rice acres may pressure prices
While tighter supplies in the 2017/18 marketing year created a more favorable situation for prices, uncertainty about export demand and the potential for larger acres will likely limit any upside potential. Early projections call for increased rice acres in 2018, with the market recapturing 300,000 to 400,000 of the 650,000 acres that were reduced in 2017. Given that the price increase in 2017 is thought to be primarily supply driven, this increase in acres could put significant downward pressure on prices as we move into the 2018 growing season.
Current market prices in Louisiana remain in the $20-per-barrel ($12.35 cwt) range. Short-term price movement could see prices moving marginally higher with a 50-cent to $1-per-barrel increase seeming plausible. Anything higher than this would likely require a better-than-expected performance out of milled rice export demand.
Looking to the 2018 growing season, it is difficult to project prices remaining at current levels, particularly if large acreage increases occur. If the market recaptures most of the acres that were lost in 2017, it may be logical to suggest that prices would move back to the $16- to $17-per-barrel ($9.88 to $10.50 cwt) experienced in 2016.
However, the improved supply and demand situation created by the lower production in 2017 should give this market enough of a solid base to prevent prices falling all the way back to 2016 levels. Assuming a 300,000- to 400,000-acre increase in 2018, a logical projection for prices for the 2018/19 marketing year would be in the $17- to $19-per-barrel range ($10.50 to $11.73 cwt).
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.