Sunday, November 28, 2021

Rice market update for the week ending Oct. 15, 2021

• By Scott Stiles •

grain bins trucks
Trucks were moving grain out of bins earlier this summer to make way for the new crop.

The focal point for the rice market this week was the U.S. Department of Agriculture’s monthly WASDE report released on Tuesday, Oct. 12. Changes to 2021/22 long-grain production were relatively minor.

However, there was a slight increase of 0.1 million hundredweight. Expected production now stands at 144.3 million cwt —down almost 16% from last year. The increase in production came on a relatively small 2 pound per acre bump in average yield to 7,428 pounds.

Yields, based on grower surveys, were increased in Louisiana and California this month. Texas saw a 300-pound reduction. No adjustments were made to harvested acreage, which is projected at 1.942 million.

Imports on the decline

The most noticeable change in U.S. long-grain supply was a 2 million cwt reduction in imports to 28 million. USDA noted higher freight costs and reduced availability of shipping containers could impact rice imports into 2022.

Total domestic and residual use was decreased by 1 million cwt to 114 million. There were no changes this month to exports.

Ending stocks were decreased by 0.9 million to a net 23 million cwt. The season-average farm price for long-grain was unchanged at $13 per cwt or $5.85 per bushel.

2021 long grain supply and demand chartWhile there was some tightening in long-grain ending stocks this month, Chicago Board of Trade rice futures closed 7 ½ cents lower following the October WASDE. However, the November contract quickly retraced Tuesday’s loss, adding a combined 16 ½ cents over the next two sessions, closing at $13.87 on Thursday.

Trading Friday morning was 4 to 6 cents higher. Around eastern Arkansas, cash rough rice bids at mills were $6.09 per bushel. early Friday. Bids at driers were in the $5.95 to $6.02 per bushel range.

Open interest is quickly evaporating in November rice futures, as over 1,500 contracts have been liquidated since last Friday. Looking ahead, January 2022 rice futures currently trade at $14.16 per cwt.

Input costs remain top concern

The March, May and July 2022 contracts all trade above $14 as well, with about 10 cents of carry between each contract from January to July. Carrying-charge markets try to provide an incentive to store a crop. This could also be a signal of slowing demand.

Cumulative long-grain export sales are starting to lag last year’s pace. USDA anticipates more export competition from South America in the 21/22 marketing year. Like here in the United States, input costs are a top concern in Brazil as well.

A Bloomberg article released Thursday mentions Brazil spot prices for phosphate fertilizers have more than doubled over the past year. Potash and urea have tripled. In addition to the sharp price increases, there’s concern about delivery/availability.

Article: Fertilizer Price Shock Threatens Crop of World’s Key Corn Supplier

2020 PLC payments

There were no adjustments this month to the old crop (20/21) long-grain or medium-grain balance sheets. The season average price outlooks for both classes remain at $12.60 per cwt. ($5.67 per bushel) for long-grain and $13 per cwt ($5.85 per bushel) for southern medium grain.

This would equate to 2020 Price Loss Coverage (PLC) payments of 63 cents per bushel for long grain and 45 cents per bushel for southern medium grain. These payment rates do not include sequestration. USDA is expected to release the final 2020 marketing year average prices Oct. 29.

The table below includes the final 2020 PLC payment rates for wheat, peanuts and seed cotton. Projected payment rates for long-grain and medium grain are included as well.

2021 PLC payment rates

Crop progress:

As of Oct. 10, 81% of the U.S. and Arkansas rice acreage was harvested. Arkansas’ harvest progress is on par with last year but lags 9 percentage points behind the five-year average.

Harvest has wrapped up in Texas and Louisiana. California and Missouri were approaching 70% harvested as of last Sunday. Record yields are projected for both of those states this year — 8,900 and 8,000 pounds per acre respectively.

2021 crop progress

Scott Stiles is a University of Arkansas Extension agricultural economist. He may be reached at sstiles@uaex.uada.edu.

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