Volume 18, Issue 24

June 17, 2021

Challenges abound in production for the domestic market, and for shipping logistics in the export market. For long grain in the south, non-stop rains and cloudy weather are drowning the rice crop and delaying its growth in Arkansas, Louisiana, and Mississippi. On the west coast, a complete lack of rain is threatening the Calrose crop in California. On the export market, skyrocketing dry bulk and container rates continue to make shipping near impossible, and with new guidance from the Fed, a strengthening dollar further complicates trade. Add the historic heatwave that is threatening to break over 300 record highs across the U.S., it is shaping up to be a challenging year.

While the rice crop is faring better than soybeans in the areas affected by the floods and overcast weather, the situation continues to worsen for an already decreased crop. In Mississippi on account of the rain, acres are expected to drop by as much as 10,000, down to 100,000 acres. While acreage reduction isn’t pegged in other regions, the slow maturation is putting a question mark around yields and beginning to poke holes in the expectation that Arkansas will produce its million acres of long grain.

Iraq has taken official action in how they will be handling rice procurements moving forward. Instead of issuing tenders as in years past through the IGB, they will now be looking for a private-public partnership through a food-stuffs procurement division. While this doesn’t guarantee any business, it does provide a kernel of hope that the U.S. may capture some of the much-needed milled business, though competition will be fierce among the cheaper origins in South America. For example, while the U.S. is hoping to connect with Iraq in their new purchasing system, Uruguay has already sold two 33,000 MT tranches to Iraq.

In Asia, the problem is shipping. Container rates and availability are plaguing every trade, and the only origin seeming to navigate it with relative ease is Vietnam. Their prices are approximately $25/ton over Thai prices, but their ability to deliver has remained consistent. India continues to be export at a rapid pace on account of low prices now at $390/ton, which is unchanged from last week. Thai prices have dropped about $5/ton this week as they scramble for business against Vietnam.

The export sales report shows net sales of 29,500 MT, which are up 21% from last week, but down 36% from the prior four-week average. The lion's share came from Haiti, Mexico, and Honduras. Exports of 65,400 MT were up 92% from last week, and 27% from the four-week average. Mexico led the pack with 25,200 MT, then Costa Rica with 17,400 MT, and Haiti with 15,700 MT. Japan and Canada both had minor amounts as well.

The futures market continued to drift lower this week as prices slipped and both open interest and volume gained. As mentioned last week, based on these components, many technicians would consider this market to be weak and would expect the trend to continue for now. Since there are some fundamental factors at play with regards to production, we could see volume slow which could proceed a small reversal in the nearby, but that action doesn’t appear imminent at the moment. 

This week on Tuesday, June 15, the Senate Appropriations Subcommittee on Agriculture, Rural Development, Food, and Drug Administration, and Related Agencies held a hearing to discuss the F.Y. 2022 budget request for the U.S. Department of Agriculture (USDA). Testimony from USDA Secretary Tom Vilsack focused on ways in which USDA can address climate change and severe weather events, highlighted agriculture research and relief initiatives, and outlined a number of efforts to fight food and nutrient insecurity, water and air contamination, and cyber-attacks. For more detailed information click to view a memo below..