As Mid-South rice farmers move into the final stages of the 2020 planting season, they anticipate better market opportunities than they've seen in recent years.
Numerous factors contribute to the upturn, and, as is usually the case with global markets, a complex set of circumstances surround rice price movements.
Scott Stiles, University of Arkansas Extension economist, fielded a few questions about market movements.
What are the moving parts behind the current improved price?
"Old crop futures (like the May and July contracts) traded to a 12-year high last month with the May contract trading to $18.70/cwt. The CME rice futures are tied to long-grain rough rice fundamentals. The 2019/20 long-grain supplies (ending stocks in particular) are tight and export demand has been good.
"Long-grain ending stocks for the 2019/20 marketing year sit at 14.7 million cwt, the lowest since 2003. Export sales for long-grain rice are 14% ahead of last year per USDA’s weekly reporting."
How big, if any, a role does the pandemic play? Exporting countries hoarding? Is that ongoing or beginning to slow?
"The news surrounding rice export bans was psychologically supportive to futures prices. That's starting to fade. During March and April, the export restrictions announced by some Southeast Asian countries tightened the global rice market. Today, Asian exporters are starting to relax some of the export restrictions. Cambodia and Vietnam are two recent examples. Vietnam banned rice exports in March and limited exports in April. Unrestricted exports resumed May 1." (https://reut.rs/2WwpOby)
Will the Arkansas acreage increase and early crop conditions affect markets?
"Referring back to the $18 plus for the May contract, prices are not nearly that strong for new crop (2020) futures, such as the September and November contracts. Those contracts are currently trading between $11.90 and $12/cwt.
"Planting delays in Arkansas, Mississippi and Missouri have offered some support to new crop futures, however. Arkansas rice planting has lagged the five-year average pace this spring. However, in recent weeks it has moved ahead of last year’s very slow pace. In Monday's (May 11) Crop Progress, NASS had Arkansas rice planting at 67% complete compared to the average pace of 82% and 51% last year. Rains are interfering with planting again this week.
"We expect to see growers plant all of their intended rice acres. There’s little to no economic incentive for them to shift acres to soybeans.
"In USDA’s March Prospective Plantings, Arkansas’ total rice acreage was expected to reach about 1.4 million. We think 1.5 million acres is more realistic — maybe even a little higher.
"Unfortunately, the market is left to guess at acres until USDA releases the June 30 acreage report. What’s revealed there could have a major influence on rice prices for the remainder of the year."