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Rice Commentary
MILO HAMILTON
AUSTIN, TEXAS
What kind of a marketing year for rice will we have in 2018/2019? Considering the current uncertainty surrounding world agricultural trade that is a very good question. The issue of China and the price of rice versus soybeans does impact rice acreage a bit as there is still some indecision in April about what to plant, rice or beans. But Mexico is more important to US rice demand than China, who has bought very little rice from the US so far.
To keep it simple, I see two factors at work in determining the direction of new crop prices. First at this time of year, there is the question of how much of an increase there will be in long grain acreage. Since 2012 acreage has swung up and down dramatically. The price of rice to soybeans is very important from late fall until late spring. Acreage in 2014 was up 24 percent, in 2015, down 15 percent, 2016 up 30 percent, down 27 percent in 2017 and now we are looking at an increase of perhaps 12 percent plus in 2018. Rice can be planted late but then the worry is what the temperatures will be at harvest.
As a general rule of thumb, a year with increasing long grain acreage can lead to an early seasonal price high, which would suggest selling and pricing your rice early in the marketing year. When acreage is down, you may wish to delay selling for a while. There are however exceptions to this rule such as 2015 (should have sold early) and perhaps 2018 (sell late perhaps).
Let’s see what happened from 2014 to 2018. In 2014 selling early was useful as the price collapsed and acreage was up 24 percent. In 2015 acreage was down 16 percent but the price plunged again anyway. The problem was the Thai market which fell out of bed and sucked down rice prices across the globe. In 2016, acreage was up 30 percent and selling early was a good idea. In 2017, acreage declined by 27 percent which suggested going hand to mouth on sales until new crop was harvested. Actually the specific high came early after harvest despite the 27 percent cut in acreage. The good effect of reduced acreage, however, was that the market until now has traded much higher than in 2016/2017 and you got a better price.
So what about 2018/2019? We would advocate getting some narrow basis locked in, if you can find it. Why so? If the price goes way down as it did in 2015 to 2017, you could see the rice basis widen. If the world market in Asia has turned higher, the basis could still expand if speculators come back into the market on the long side. There are extenuating circumstances that would indicate that Thai rice prices a year from now will be higher than they currently are. Higher Asian rice prices put a floor under the US market. Three reasons for higher prices ahead: a weaker US dollar, more weather/climate problems and the technical and fundamental make up of the market, which suggests rice prices will be turning up.
Contact me if you want more specific advice: Milo Hamilton at milo@firstgrain.com or my cell at 512 658 8761. ∆
Milo Hamilton is President and Co-founder of the rice market advisory service, The Firstgrain Rice Market Strategist. He has extensive background buying and selling rice from 1981-1999. He established Firstgrain, Inc. in 2000. He has clients from farmers to rice processors, brokers and traders to international concerns involved in human and pet food rice products. With his business partner, Kevin Ries, Milo publishes the online service, www.firstgrain.com that is read by buyers and sellers around the world. His company, Firstgrain, Inc. is focused on rice and believes that “every individual is a market force.” The name, Firstgrain, comes from a Chinese proverb, “The precious things are not pearls and jade but the five grains, of which rice is first.” His email address is: milo@firstgrain.com.
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