December 14, 2016
2016 Total Arkansas Rice: (Slides 2-6)
2016 total Arkansas rice harvested acres was 1,521,000 or 18 percent greater than 2015’s 1,286,000 harvested acres. The 2016 yield was 7,150-pounds or 159 bushels per acre. Arkansas all rice production or total rice production was 109-million cwt. the 4th largest on record. The previous 15-year average was 98.4-million cwt.
2016 Arkansas Long Grain Rice: (Slides 7-10)
2016 Arkansas long rice harvested acres was 1,390,000, 17 percent above 2015’s 1,045,000 harvested acres. The previous five-year average was 1,068,000 acres.
The 2016 Arkansas long grain rice production is estimated at 99.4-million cwt. the 3rd largest on record.
The top four Arkansas long grain rice counties by harvested acreage are Poinsett County with 98,595; Jackson County 96,746; Cross County 91,957; and Lawrence County with 89,206 harvested acres.
2016 Arkansas Medium Grain Rice: (Slides 11-14)
2016 Arkansas medium grain rice harvested acres was 130,000. The previous 14-year average was 163,000 acres.
The 2016 Arkansas medium grain rice production is estimated at 9.3-million cwt.
The top 3 Arkansas medium grain rice counties by harvested acreage are Poinsett County with 22,739; Jackson County 16,699; and Lawrence County, 15,764 harvested acres.
2016/2017 Global Rice Market Challenges: (Slides 15-22)
Global supplies have exceeded demand for the current 10 marketing periods. Harvested acres are at record levels; yields are stable; production and consumption are the highest on record; global trade a little slow; and global stocks are slowly building. That said, a negative weather event or another anomaly event could easily move global production below consumption.
World rice harvested acres are the largest on record at 162.3 million hectares.
World rice yield has been at 4.4 metric tons per hectare for the current 5 production seasons.
World rice milled production at 483.8 million metric tons is the highest on record.
World rice total use at 478.8 million metric tons is the highest on record.
World rice production has exceeded consumption in the current 10 marketing periods.
World rice trade at 41 million metric tons is the 3rd highest on record, which in part reflects anemic global growth. That said global reflation is providing a bullish trade bias for 2017.
World rice ending stocks at 121.7 million metric tons is the highest since 2001/02 marketing period.
2016/2017 U.S. Long Grain Rice Market: (Slides 23-30)
U.S. rice harvested acres are estimated at 2,412,000 acres or 507,000 acres above the previous five years. 2016 long grain rice production then is estimated at 32-percent above 2015. This is significantly outpacing the present demand for U.S. long grain rice, which is why USDA has a 2016/17 price estimate range of $9.20 to $10.20 per cwt.
2016 long grain rice harvested acres are estimated at 2,412,000 acres, 31 percent above 2015. The five-year average is 1,904,800 acres, the 10-year average is 2,120,300 acres and the 15-year average is 2,268,467 acres.
2016 long grain rice production is estimated at 176.1 million cwt., 32 percent above last year. The five- year average is 138 million cwt and 10-year average 147 million cwt.
2016/17 long grain rice total supply is estimated at 219 million cwt, 2nd largest on record, 22% above last year. The five-year average was 182 million cwt and 10 year average 189 million cwt.
2016/17 long grain rice total exports are estimated at 79 million cwt, 6th largest on record. The five-year average 70 million cwt and the 10-year average 72 million cwt.
2016/17 long grain rice total use is estimated at 182 million cwt., 2nd largest on record. The five-year average 159 million cwt and 10 year average 166 million cwt.
2016/17 long grain rice ending stocks are estimated at 37.2 million cwt the largest since 1985. The five-year average 22.3 million cwt and 10 year average 23.8 million cwt
Macro Issues Key Driver of Market Price Activity
Present global intervention activities by Governments and Central Banks have been inadequate to overcome: (Slides 31-34)
Chronic global slow growth
Low to negative interest rates
The expectation is that a continuation of current intervention policy would cause domestic and global chronic deflationary forces to remain dangerously problematic. The impact would be sustained chronic price weakness likely for equity and commodity prices; an expansion of negative interest rates globally; and debilitating global debt.
“Transitional Reflationary Policy” by Governments’ and Central Banks’ Intervention
Global economic transition in reality has been underway throughout 2016. Simplistically the objective is to reflate the domestic and global economies and re-energize global growth, which in these current economic times is no small accomplishment if achieved.
The catalyst for the reflation activities is elevated levels of fiscal stimulus and Central Bank intervention activities. This should be:
Bearish bonds, utilities, etc.
Increasingly bullish many hard assets like stocks, commodities, land, etc.
Bonds appear to have topped with low yields at least for the next couple of years
Equities are the direct beneficiary of the bonds topping followed by commodities, land, fine arts, etc. new highs.
“Reflation” One Driver Lifting Global Markets and Commodity Prices
Near Term’s Reflation’s Impact on Select Markets (Slide 35)
Positive Impact on Rice, Cotton and Grain Prices
The strength or weakness in the following markets is positive for future rice, cotton and grain prices.
$USD US Dollar Index – Cash Settle, Monthly Chart, 1997 to present, Slide 42
Without major global 2017 reflation efforts, dollar could surprise to the upside
Light crude above 52.50 can move significantly higher
WTIC Light Crude Oil – Continuous Contract, Weekly Chart, Feb. 2014 to present, Chart 41
Chronic global slow economic growth & over production produced anemic economic activity and commodity prices
Globally – Aggressive Government and Central Bank intervention required to elevate economic activity and commodity prices in the aggregate
$CRB Index, Commodity Index, Monthly Chart, 1997 to present, Slide 40
More strength than weakness since January, 2016
Building momentum critically important for healthy commodity prices
EEM Emerging Markets, Weekly Chart, February, 2014, to present, Slide 39
Slowly building economic momentum
EFA Global Equities – excluding U.S. and Canada, Weekly Chart, Feb. 2014 to present, Slide 38
Dow Jones Industrial Average, Weekly Chart, February 2014 to present, Slide 37
2017 expect more price strength than weakness
10 Year US Treasury Yield, Daily Chart, May 2016 to present, Slide 36
Yields have risen from the July low 1.34 to 2.45
Near term low in place
$SOYB – Soybeans, Continuous Contract, Weekly Chart, 2014 to present, Slide 43
Geopolitical uncertainty a factor contributing to lift in some commodity prices
Weakness to previous low a possibility
2017 will have pricing opportunities
$Corn – Corn - Continuous Contract, Weekly Chart, 2014 to present, Slide 44
Geopolitical uncertainty a factor contributing to some commodity price support
Near term neutral
Remain concerned about price weakness
2017 will have pricing opportunities
$Wheat – Wheat - Continuous Contract, Weekly Chart, 2014 to present, Slide 45
2017 will have pricing opportunities
Rough Rice - January 17 (ZRF17), Monthly Chart, 2006 to present, Slide 46
Global slow growth have countries’ food security conscious contributing to excess production and price weakness
Reflation should start working as a factor in the favor of higher rice prices
Domestically and globally over supply remains problematic
Overplanting accompanied with a favorable global weather in 2017 would be problematic
Weather Unknowns: In 2017, what are the global impacts of La Nina and other possible anomaly events? They probably provide some price support. Slide 47
Bobby Coats is Professor, Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture.
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