The Rice Advocate, Vol. 17, Issue 34

Volume 17, Issue 34

August 27, 2020

In This Issue:

Hurricane Laura: Damage Assessment On-Going in South Louisiana as Storm Enters Arkansas, Missouri
USRPA Addresses Key Long Grain Rice Markets
Washington DC Update
Still Many Unknowns in the World Rice Market

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Hurricane Laura: Damage Assessment On-Going in South Louisiana as Storm Enters Arkansas, Missouri

It has been a rough week in the rice industry with all eyes on Hurricane Laura as it plows through the majority of the long grain rice production and halts trading until the damage can be assessed. In the export world, reported sales for the week were notably increased over the week prior and are getting back to “normal” levels that have not been seen since the early spring. Continued export sales volume will be integral in keeping the current estimated crop at manageable levels. Vessel loadings also showed a strong improvement since the previous report.

In other parts of the export world, benchmark Asian pricing has appreciated as well. Some of this is due to exchange rate changes, while the balance is related to the underlying market fundamentals. A tightening supply side equation seems to be largely responsible in that area. USDA seems to have accepted this as well and has raised its world market price estimate for both long and medium/short grain classes as a result.

In the domestic cash markets, very little has happened from a pricing standpoint as the focus has been on Hurricane Laura this week. This cyclone has significantly impacted the Gulf Coast of Louisiana and East Texas with devastating winds and flash flooding. Its current track puts it on course to impact most of the remaining long grain acres in the United States. With the yield and quality situation in those areas still unknown, this storm could have a very long-term impact on the marketing year. As a result, cash trading has been limited at best as buyers and sellers across the rice growing region have been focused on surviving the hurricane.

From a production standpoint, the Texas and Louisiana harvest is nearing its conclusion (prior to the storm) and Mississippi is projected to start up in the next week or two. The Upper Delta will progress into harvest within the next 2-4 weeks, depending on the impacts of the storm. Needless to say, Laura is particularly poorly timed for the rice industry.

The futures market over the week has made significant gains over last week’s trading. This week saw the open contracts on the board appreciate by 0.89% - 2.5%, largely on weather related concerns. This occurred on a higher daily volume, although open interest was slightly lower than at this point last week. The next few days will reveal a lot as to what trials the rice industry will face over the coming months. The impacts of Laura cannot be overstated at this time. Not only has the crop itself been negatively impacted but the effects on infrastructure will be long term.

USRPA Addresses Key Rice Markets in Virtual Event with Chinese Rice Buyers

USRPA successfully hosted another virtual event featuring eight speakers from the U.S. presenting for an audience in China this week. Over 80 attendees registered for the live event via Zoom and many have already watched the recorded seminar since.

Grace Wang, Eastern Hemisphere Director, moderated the event and Marcela Garcia, USRPA COO welcomed the audience on behalf of the USRPA and its members and thanked them for their participation. Long time supporters of USRPA, Riviana Foods, and RiceTec presented on various products and services they offer their clients. Dwight Roberts, President & CEO of USRPA gave a very informative narrative on the current U.S. long-grain crop. Tommy Turner, Texas Rice Council President & USRPA Board Member, gave a very thorough presentation on U.S. rice production, including information on varieties and the latest in farming technology. Stuart Hoetger rounded out the evening with the latest developments of medium grain rice from California.

An important highlight of the seminar is our honored speaker, LaShonda McLeod, Director of ATO from the U.S. embassy in Beijing, who gave an overview of the US-China Phase One deal and commented that China continues to make progress towards its commitment to increase purchases of U.S. agriculture. She further commented, “Regardless of the concerns we are facing in other parts of our relationship, both China and the U.S. remain positively engaged in the trade agreement - actually, it is a bright spot in our bilateral relationship.”

Overall, the event was a success and both attendees and speakers responded positively. The messages of nutritious, safe and reliable qualities of U.S. rice supply was mentioned continuously. Networking and communication with our trade contacts worldwide has become critical during this special pandemic. We will continue many more virtual programs in other countries to address critical issues that are facing U.S. rice and the global rice market.

Those who were not able to join us live are able to watch the on-demand recording with following link: https://us02web.zoom.us/rec/play/u8Z7cO6orz43E9PHtgSDBvVwW43rf_2s1nIe8_VeyR3hAnRVOgavZrZDMbAsm3L1VA3OphFcJ2p9KfGt?continueMode=true

If you should have any questions, comments or need technical assistance, please feel free to contact Veronica Galvan, Events & Technology Manager at veronica@usriceproducers.com.

Washington DC Update

On Monday, August 24, 2020, USDA published in the Federal Register a final rule regarding payment limitations and program eligibility (Final rule here). The rule is intended to implement the changes required by the Agriculture Improvement Act of 2018 (2018 Farm Bill) and other changes made by the Farm Service Agency (FSA) on behalf of CCC.

Specifically, the changes update program applicability and payment limitations; and specify that the Secretary may approve a waiver of the average adjusted gross income (AGI) limitation for participants of certain conservation contracts administered by FSA and the Natural Resources Conservation Service (NRCS) on environmentally sensitive land. Also, the changes expand the definition of ‘‘family member’’ to include first cousins, nieces, and nephews. This rule also includes changes that make minor clarifications and updates throughout part 1400 pertaining to payment limitations and program eligibility.

Although the program changes are described as mandatory changes, there is much discussion among agricultural policy makers surrounding the necessity of all the changes. Of particular note are the several rule changes to the definitions in 7 CFR 1400.3 which includes the definitions of ‘‘active personal management,’’ and ‘‘significant contribution’’ as it relates to management. These are elements crucial to determining actively engaged which will be used in determining program eligibility. Discussions and inquiries on this final rule are ongoing between the Hill, USDA, and agricultural organizations so stay tuned for more information as it becomes available.

Still Many Unknowns in the World Rice Market

By: Milo Hamilton, Senior Economist, Firstgrain, Inc.

All is not well in the world rice market. Pakistan is dealing with heavy rains and quality problems with existing stocks. Hurricane Laura this Wednesday night made landfall near Lake Charles with a lower storm surge than forecasted but will molest rice in the field with wind and rain from Louisiana to North Arkansas this week.

Beyond the weather, domestic rice demand is up in the US and Brazil over a year ago. In Asia, both India and China claim significant increases in rice production in 2020 despite the Pandemic and despite less than ideal weather. However, the main rice crop there has not yet been harvested or stored. Rainfall in India is 7% greater than the average. In Its neighbor, Bangladesh, the rain has been horrific. India is not out of the woods either from the COVID19 pandemic. The Economist reports that upwards of 25% of New Delhi is infected with the virus. Container shipment costs are up more than 15% this year.

China is suffering from the worst flooding since perhaps 1961. In that year, its society was living through the Great Leap Forward, which was not so forward and not so great. Statistics in that period are perhaps not so reliable.

As for China’s rice production, it denies the floods have kept its farmers from expanding rice production within its borders. Yet, the Yangtze just made its way through its fifth flood now since June; the Yellow River basin is forecasted to endure more rain. The Yangtze is more like the Colorado River in the US, flowing through canyons, and the Yellow River is more like the Mississippi River and its vast and fertile river plain. Our weather consultants believe that into September rains will pick up and may interfere with harvest. They forecasted drought in South America in September in countries that export rice.

We would watch the Indian rice price as a lead indicator for Asia and the Vietnamese rice price as one indicator of overland demand from China, it there is any.

In the Americas there is ongoing drought in some regions in the Southern Hemisphere. There are rumors that Brazil wants to import rice from the US up to 200,000 MT of paddy. In 2009/2010 Brazil bought 35,000 MT from the US. We go into the end of this marketing year in Mercosur with very tight rice stocks. Stocks are so tight in the US that rice has been transshipped from the Gulf Coast up to Arkansas for milling, very unusual.

In Brazil, we had presumed that if prices skyrocket in South America, then rice acres would go up. What happens in 2021, if rice acres in Mercosur do not increase or even decrease? Rice farmers there may plant crops like milo instead of rice because it takes less water. Unlike the US, Mercosur relies a great deal on surface water availability.

We face a very active hurricane season along the Gulf Coast. When it rains, it pours in the world of rice. You want a stable climate? Our advice to you: Do not grow or trade rice. Or get a good meteorologist or two. All we know is there are many unknowns ahead of us with no precedent in recent times.