|Please remember this |
A few observations from the USDA Numbers on Jan 12th: Yield was raised slightly, this flies in face of numerous field reports across Arkansas suggesting it is overstated by 5-7mm CWTsDomestic use of long grain is projected at 99 million versus 109 million last year and imports at 24.5 million versus 23.4 million last year. This implies use of U.S. grown long grain will be off 11.1 million, a decrease of ~13%. As indicated by the Dec 1st stocks number, there is virtually no change in use of U.S. grown long grain so that would imply the second half of the marketing year consumption of U.S. grown long grain must decrease by 26% . There is no way that that will happen. For all the reasons discussed before, domestic demand is virtually inelastic. In fact, Nathan Childs, author of the Rice Report, states: “Based on data reported by NASS in the January 2020 Rice Stocks shows well below expectations. The pace of U.S. shipments through late December indicates even higher than currently forecast. However, a projected substantial tightening of U.S. supplies later in the market year and rising U.S. prices are expected to eventually slow the pace of U.S. exports. The substantial projected decline in long grain domestic and residual use from the previous year is based on much smaller supplies.” These statements seem to suggest that he believes we are going to run out, thus the smaller usage. December 1st total long grain supply was 83 million. Using the USDA domestic use and exports average monthly use per month is 12.1 million. Figuring exports were somewhat front end loaded, let’s assume the monthly use to be more like 11 million. This would implying that March 1st stocks should come in around 50 million. The problem is that this number doesn’t come out until the end of March by which time it is simply too late to ration in an orderly way. With five months left after the report in the marketing year, it would imply a NEGATIVE 5 million CWT carryout. We have delayed the rationing far too long for it to be an even remotely orderly process.USDA long grain exports are projected at 70 million hundredweights, up 1 million from Dec. That is broken down as:34mm CWTs milled rice exports. Through Jan 16th 25mm CWTs, or 76%, has already been sold with 28 weeks left in the marketing year with traditional buyers on deck to buy the balance: 5mm CWTs to Haiti, 1.5mm CWTs to Saudi Arabia, 1mm CWTs to Canada, and .5mm CWTs to Mexico.
31mm CWT’s Rough rice exports. Through Jan 16th we have sold 22.6mm CWTs. That equates to 73% with 28 weeks to go in the marketing year. Buyers on deck include 2.6mm CWTs to Mexico, 2.5mm CWTs to Columbia (tendered yesterday), and 3.1mm CWTs to the rest of Latin America. This leaves no room for potential interest from Iraq and Venezuela.
4mm CWTs Government give away
1mm CWTs Brown rice exports.
Lastly, the open interest has grown from 8,500 in early December when futures were around $12.00 to 12,300 today with futures at approximately $13.50. The point is that we are obviously attracting new players while shrinking the amount of rice in hands of producers and end users. The upside moves are going to become more violent as end users scramble for the remaining supplies.
In my opinion, the upside potential remains considerably higher than where we are now, keep in mind that it is a VERY thinly traded market. Total open interest in all Rice is 12,300 contracts. Corn is 1,500,000 contracts and Soybeans 750,000. BE CAUTIOUS AND NOT FOR EVERYONE, CONSULT WITH A BROKER.