What Could Flip The Market Outlook For US Rice In 2020/2021: Up Or Down?

 Part One Of A Two Part Series

MILO HAMILTON

AUXTIN, TEXAS
   Think of the rice market as a stool with three legs: Leg 1 The Americas rice Market. Leg 2 The Asian rice market. Leg 3 World rice trade.
   Three things need to happen to get the US rice price rolling down hill in 2020:
   1. Increased rice acreage in the South.
   2. Weak paddy and milled rice demand in the Western Hemisphere and the Far East.
   3. No change in the stalemate between China and the US on ag product trade.
   If new crop soybeans trade over $10 per bushel, however, all bets are off on new crop acreage plantings for long grain in the South. Rice export demand is function of two things: stocks in the Western Hemisphere and continued glut of rice in Asian exporter hands. In the end, the third issue, trade agreements and preferences are fundamental as it can impact demand for US rice in the years ahead. In 1994, Japan, for example, made a long-term commitment under WTO to buy US rice. Could China make such a commitment? This question is intriguing, if far-fetched.
   One leg, then, of my rice market stool is the Americas, the next is Asia and the third is trade, driven by agreements or buyer preferences, as in the case of rough rice exports down the Mississippi River these many years. I have been actively involved in rice markets globally since 1981, as a rice buyer and since 2000 as a rice advisor, not a rice broker.  
   Trade issues are big part of world rice demand. The California rice industry has benefited greatly from WTO commitments from Japan, South Korea and Taiwan. These three countries and most importantly Japan had kept prices in California higher than they otherwise would have been. Also, paddy export demand from the US Gulf is due to preferences for many Latin American countries to import paddy or rough rice. They import rice from the US not because it is the cheapest rice in the world but because it secures their marketing chains. Imports of cheap, heavily subsidized rice from Asia turns their market control over to the global grain traders buying rice and selling it to big wholesalers and cutting out the mills and their brands in their local markets. Essentially, this system is a non-tariff barrier to rice trade in the Western Hemisphere. 
   Put this on your calendar. At the Memphis Hilton at the end of this month I will present my thoughts at the Midam Cotton and Rice Conference there. Hope you can make it on 30-31 January. ∆
   MILO HAMILTON: Senior Economist and President, Firstgrain, Inc.