Below are few of Andy’s latest thoughts regarding the rice market. Please remember, this is NOT a recommendation to buy or sell but rather Andy’s personal opinion and thoughts. For full disclosure Andy is currently long the rice market and looking for higher prices.
- The usage this year from Dec 1st to March 1st was larger than the last two years due to extremely robust rough exports. Usage the prior two years averaged 24.5 million and that was lower than it should have been because of a negative residual, larger than usual.
- Add the extra exports to that and drop a little of the negative residual use and total use should be 29-30 million which implies a March 1st stocks number of 49-50 million, call it 49.5 March 1 stocks.
- Our carry out this year is projected at 14.2 million, the lowest since the early 2000’s. Taking the average use for the next 5 months for the crop year, actually 6+ months until nucrop supplies are available, off the 52.5 million total stocks, gives a carry out of 10.5 million. This doesn’t sound like a big difference but remember they government incorporated a large negative residual usage the last two years. Exports have been front end loaded so very little left to be sold and any out of the ordinary sale just adds to the tightness.
- The cash market reflects a vastly shorter supply left than these numbers imply. The actual stocks number can be anything as the surveys NASS sends out don’t get turned back in by as many farmers as needed for a more accurate assessment. . Bottom line it needs to be above 54 million for the 14.2 million carry out to prove accurate anything less means more domestic rationing and there is absolutely no sign of that.
- Compounding the problem, other than water, guess what the #1 item encouraged to be stocked up on by all the survival websites regarding the Corona Virus is?? You guessed it Rice. There has been widespread buying of rice by people that don’t ordinarily do so adding to domestic use. This latest surge probably added anywhere from 3-5 million hundredweights of demand that ends up in household storage in case of disaster. There are an estimated 40,000 grocery stores in the US (includes Walmart’s and club stores) and pictures of empty rice shelves from all over the country abound. The next 6-8 weeks are going to be extremely tight for long grain here in the US and prices will have to try and ration the remaining supply whatever they may be. I remain biased that significantly higher prices will be required to ATTEMPT such a feat.
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