Will the 2018-19 marketing year repeat 2016-17 low prices? It depends…

• By Kurt Guidry •

grain cart south louisiana When examining the market situation for a commodity and trying to project where that market may trend, it can often be useful to look back at similar years. When looking at the current rice market, the one thing that becomes apparent from a supply and demand numbers standpoint is that it is very similar to what was experienced during the 2016/17 marketing year.

The 2016/17 marketing year was characterized by large supplies, large ending stocks, and low cash prices that fell to and below the $16 per-barrel ($9.88 per hundredweight or $4.45 per bushel) level. Following the 2016/17 marketing year, rice acres were reduced significantly in the United States, which helped reduce overall supplies and helped push cash prices up to the $19-$21 per-barrel range ($11.73 to $12.96 cwt or $5.28-$5.83 per bushel).

With the higher prices in 2017 and the lack of attractive cropping alternatives heading into 2018, rice acres increased by nearly 500,000 acres or nearly 20 percent. Along with increased acres, yields are also expected to be up slightly in 2018 from the previous year, despite periods of adverse weather conditions during the growing season.

The increased acres and yields are projected to quickly eliminate the relatively tight market situation created during the 2017/18 marketing year and put this current market year back to the levels experienced during the 2016/17 marketing year.

Are we in for another 2016-17 market?

So does having supply and demand numbers similar to the 2016/17 marketing year mean that prices are destined to return to the levels seen during that year? While cash prices have come down in response to growing supplies and stocks, they have, to this point, been able to stay slightly above the levels seen during the 2016/17 marketing year.

After starting the growing season in the $19 per-barrel ($11.73 cwt) range, cash prices have fallen to mostly the $17- $17.50 per- barrel ($10.50-$10.80 cwt) range. Although they have fallen, they are not at the levels seen in 2016/17.

Despite having similar production levels, smaller beginning stocks to start the 2018/19 marketing year have helped keep total supplies from reaching the levels seen in 2016/17 and have likely helped limit downward pressure on prices.

In addition, improved export demand to this point in the marketing year has also likely helped limit downside pressure.

Current rice export shipments are nearly 10 percent higher than the same time last year with increases seen for long-grain rough rice exports and medium-grain milled exports. In addition, recent news of additional sales to Iraq, along with lower rice production in several countries throughout the world, offer the promise of continued strength in export demand.

Market must absorb large supplies

Despite the positive signs seen in export demand, the reality remains that the market must still work through large supplies of rice during the 2018/19 marketing year. As such, while downside risk for prices would seem limited at this time, it is difficult to project a significant increase for prices in the short term.

As we move toward the end of this year and beginning of next, a continuation of improved export demand could conceivably help support and move prices back to the levels seen earlier in the year around the $19 per-barrel ($11.73 per cwt) range. For prices to move above those levels, we would likely need better-than-expected demand or projections for lower acreage and production in 2019.

However, given prices of many crops, there appears to be a lack of an attractive cropping alternative and likely suggests very little acreage changes in 2019.

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.