The Rice Advocate, Vol. 17, Issue 38

Volume 17, Issue 38

September 24, 2020

In This Issue:

Mexico's Rice Market
Rice Market Update
Congress Passes CR to Avoid Government Shutdown
CBO Releases Its Long Term Budget Outlook
China Polished Round Grain Summit Holds Virtual Mtg
Texas Cuba Trade Alliance (TCTA) Hosts Virtual Meeting

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Mexico's Rice Market

With the situation that COVID-19 has created throughout the world including the US and Mexico, leaders of Mexico’s rice industry shared some interesting data with USRPA regarding rice consumption in their markets.

“April and May had a sales increase of between 150% to 200% (due to government support, not direct purchase from the final consumer) June and August maintained an average increase of 50%,” said Juan Carlos Chaidez, Director Grupo Ansera.

Jose Cremades, Manager, Mexicana de Arroz S.A de C.V. shared that, “in April, May, and June, we experienced an increase of approximately 25%... but in July and the first half of August rice sales fell dramatically. I can say that the accumulated sales in kilos as of August is only 3% higher than in 2019.”

Belen Mazzucco from Verde Valle told us, “Clearly, during the period from March to July 2020, purchases, not only of rice but of all kinds of groceries, have seen an increase in sales due to COVID-19. That increase in purchases does not mean that the Mexican consumer has begun to consume more rice. The Mexican market continues to eat the same amount of rice as in previous years, the only difference is that the consumers have stocked their pantries and cupboards more than normal just in case the quarantine was more demanding.”

Due to panic purchases of staple goods including rice during the first months of the pandemic, sales declined markedly in July and August and are expected to return to normal in the following months.

Even though rice is a common staple in the Mexican consumer’s pantry, a significant increase is not expected as rice is still considered a side dish and the most common packaging is 1 kg in size. Other factors such as price, the return to school and the lack of employment that many Mexicans face is also a factor to consider future sales.

As for price and market, the outlook is uncertain due to the unexpected demand from Brazil and the hurricanes and severe storms that have recently affected rice-producing areas in the United States.

However, according the Mexican rice industry leaders, the best thing for them is to import from their northern neighbors, and plan to continue importing paddy from the U.S. pending the price of rice. They if the price is too high, milled rice imports from Asia will enter the Mexican market, displacing U.S. paddy rice.

Rice Market Update

Life has slowed down for much of the Southern rice industry while things are just beginning to get interesting in the Upper Delta region. Harvest continues to work its way north into the final throes of the year and while quality from the Gulf Coast is below average, the more northern areas are still in play.

The export market for the week noted some decrease in the sales as overseas buyers continue the hand to mouth purchasing approach that has been seen over the past months. Vessel loadings posted modest gains as prior sales leave the country and the up and down trends will probably persist for the next several weeks until the market can figure out what the entirety of the new crop will look like. Benchmark Asian origins have contracted again over the week as the supply and demand constraints in that region have relaxed to a certain degree. As if to confirm the general market softening, USDA has lowered its world market price estimate for the week in both long and medium/short grain classes. In the domestic market, the Gulf Coast harvest has drawn to a close. Based on dryer samples to date, several trends have emerged regarding quality. The earlier rice was noted to have lower milling yields, although the total out turns were within normal ranges. Mid-season harvested lots showed stronger head yields while maintaining total pounds while later season lots saw again decreased head yields and outturns as well.

In the Arkansas area, harvest is well underway and while the total pounds per acre are considered “good,” no milling or quality data has yet been reported. Much of the market over the next few months will hinge on how good the quality and yield is in this area.

The futures market for the week posted modest gains for the nearby contracts and modest losses in the 2021 crop contracts. This is probably a reflection of the expectation of a large domestic crop of decent quality that will provide some carryover into that marketing year. The new crop contracts closed up between 1.5%-2.5% on lower average daily volume and marginally lower open interest.

Congress Passes CR to Avoid Government Shutdown

On Tuesday, the House voted 359-57 to approve a Continuing Resolution to extend government funding through December 11. The overwhelming support for the bill was the result of a last-minute deal between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin. A tentative deal that was finalized last week between the House, Senate, and Administration fell apart after provisions to restore funding to the Commodity Credit Corporation for payments to farmers and pandemic-related funding for kids who would normally receive free or reduced-price lunches at school were removed from the bill.

USRPA, along with other agricultural organizations, strongly supported the restoration of CCC funding because of its effects on USDA farm and conservation programs. Opposition from both Democrat and Republican farm state legislators in the House and the Senate Majority Leader convinced House leadership to restore those provisions which then easily passed the House.

Timing for future Senate action is uncertain at the moment. Originally it was expected that the Senate would quickly consider the legislation. Rumors this week indicate that consideration may occur later this month. In any event, once Senate action is completed the President is expect to quickly sign the legislation, avoiding a government shutdown on September 30^th.

Bill Text

Summary

CBO Releases Its Long Term Budget Outlook

For those interested in the federal budget on September 21^st, the Congressional Budget Office released The 2020 Long-Term Budget Outlook. Each year, the Congressional Budget Office publishes a report presenting its projections of what federal deficits, debt, spending, and revenues would be for the next 30 years if current laws governing taxes and spending generally did not change. This report is the latest in the series.

The report’s 30-year projections complement several of CBO’s recent releases: 10-year projections about the economy, the budget, and major federal trust funds, as well as their report about the effects on output of legislation related to the 2020 coronavirus pandemic.

CBO Director, Phillip Swagel, released a statement that the long-term fiscal challenges facing the nation are daunting. At the same time, the United States is not facing an immediate fiscal crisis. CBO’s two main points about the long-term outlook:

Federal debt is high and is projected to rise substantially.
Over the longer term, actions are needed to address the nation’s fiscal challenges.

CBO numbers underlying the first point:

Federal debt held by the public is projected to increase to 98 percent of gross domestic product (GDP) at the end of this year, up from 79 percent of GDP in 2019 and 35 percent in 2007, before the start of the previous recession.
CBO projects that debt continues to rise, reaching 195 percent of GDP by 2050, far exceeding the previous high of 106 percent recorded just after World War II.

CBO’s second point about long-term fiscal policy:

The fiscal path over the coming decades is unsustainable.
The costs of financing deficits and servicing the debt cannot consume an ever-growing proportion of the nation’s income.

Director Swagel further states that although there is no set tipping point at which a fiscal crisis becomes likely or imminent, nor is there an identifiable point at which interest costs as a percentage of GDP become unsustainable. He notes that as the debt grows, the risks become greater. In addition, he quantifies how large would the changes need to be to stabilize the debt as follows:

If the Congress wanted to adopt policies that would take effect in 2025 and return the debt in 2050—30 years from now—to its level this year (about 100 percent of GDP), it could reduce noninterest spending or increase revenues (or some mix of the two) in each year by a total of 2.9 percent of GDP. Those changes in fiscal policy would amount to about $730 billion, or $2,200 per person, in 2025.
Waiting longer would require larger changes and impose a still-greater burden on future generations.

China Polished Round Grain Summit Holds Virtual Mtg

2020 China Polished Round-Grain Rice Summit was held this week in the city of Jiamusi, located on the border of China and Russia, in Heilongjiang Province, the home of famed highest quality medium grain rice.

Rice industry experts and analysts gave thorough presentations on current issues facing rice farming in China, the production of its current crop, short term and long-term trading and pricing trends and the latest policy developments. Presentations were followed by panel discussions centered around the rice futures market. Mr. Ren Zhi, Vice President of CNAGS (China National Association of Grain Sector), moderated the single day event. USRPA staff attended the live streamed event and to gain a first-hand understanding of the current medium grain market in China.

It’s reported that early rice production in China has increased 3.9% year over year due to significant increase of early rice acreage encouraged by government policy. However average yield has dropped 2.7% to 5.7 tons per hectare. Both rice imports and exports in 2020 are expected to decrease, with imports from Vietnam (34.9%) accounting for the majority, followed by Myanmar (25.5%) Pakistan (11.4%), Thailand (10.9%) and Cambodia (9.9%).

Texas Cuba Trade Alliance (TCTA) Hosts Virtual Meeting

USRPA staff and USRPA Board member and Texas Rice Council President, Tommy Turner, participated in the Texas Cuba Trade Alliance (TCTA) virtual meeting on Wednesday morning.

The meeting was moderated by Ernest Bezdek, Director of Trade Development, Port of Beaumont. Jose Ramon Cabañas, Cuban Ambassador to the United States, and Rodney Gonzalez, Cuban Embassy Official, gave to the audience an update on the second wave of COVID-19 that Cuba is facing while also commenting that the Havana International airport could be open by the end of the year, the decision to be made in the following months. Among the topics discussed, an improved US-Cuba relationship was emphasized throughout, especially within the agricultural sector, saying that Texas has all the elements to continue with the agricultural relations.

Dwight Roberts, USRPA President & CEO has been an active board member of the TCTA since its inception and is considered the first organization formed to address agriculture issues with Cuba in the U.S.