Global 2016-17 rice production may be estimated at an all-time high of 480.7 million tons, but a world of building risk and uncertainty translate into higher rice, cotton, grain, and oil prices in the first half of 2016.

USDA’s June price estimate for 2016-17 long-grain rice is estimated in a range of $10 to $11 per hundredweight, up 50 cents from the previous month. This is partly due to fundamentals, but certainly the domestic and global macro setting has much to do with USDA’s 2016-17 price outlook.

Understanding the global macro setting or how aggregate economies behave related to inflation, price levels, rate of growth, national income, gross domestic product, changes in unemployment, etc., is extremely important in understanding today’s commodity price bullish or bearish behavior.

Sure, there are fundamental reasons for the present price associated with rice, cotton, soybeans, corn, wheat, and oil, to list a few. Fiscal and monetary policy, especially monetary policy, over the past few months has been at work supporting a dangerously soft global economy. One can certainly see the global reflation efforts in country after country have paid huge dividends.

With the BREXIT vote on June 23, it appears increasingly likely that the United Kingdom will withdraw from the European Union. If there is a British exit from the European Union, analysts will be scrambling to understand the near-term impact on all markets. The near-term impact will be different from the intermediate- and longer-term impacts.

One contention would be an exit coupled with continued accommodative Central Banks globally would be very supportive of rice, cotton, and grain prices, especially if any fundamental weakness can be identified.

U.S. RICE

USDA’s June 10 release of its world agricultural supply and demand estimates for U.S. long grain rice shows the following:

June, 2016-17 U.S. Long-Grain Rice

• 2016 planted area is the largest in the current six years, up 31 percent from last year at 2.452 million acres.

• 2016-17 beginning stocks are the third lowest in the current six marketing periods at 23 million hundredweight, 3.5 million hundredweight below 2015-16 and 500,000 hundredweight above last month’s estimate.

• Production of 181 million hundredweight, unchanged from last month, is the second largest on record following the 2010 record of 183.3 million hundredweight (2011, 116.4 million hundredweight; 2012, 144.3 million hundredweight; 2013, 131.9 million hundredweight; 2014, 162.7 million hundredweight; 2015, 133 million hundredweight).

• Total supply of 224.5 million hundredweight, up from 224 million hundredweight, if achieved will be a record (2010, 222 million hundredweight; 2011, 169 million hundredweight; 2012, 187 million hundredweight; 2013, 173 million hundredweight; 2014, 200 million hundredweight; 2015, 180 million hundredweight).

• Domestic and residual use, unchanged from last month, is projected to be the second highest on record at 105 million hundredweight following 2010-11’s 108.6 million hundredweight and 19 percent higher than the 2015-16 marketing period.

• Total exports, unchanged from last month, are projected at 81 million hundredweight, the highest since 2005-06’s 92 million hundredweight and 2002-03’s 99.5 million hundredweight.

• Total use is unchanged from the previous month and projected to be the second highest on record at 186 million hundredweight, which is slightly above 2010-11’s 186.5 million hundredweight.

• Of major concern: 2016-17 end stocks are presently projected to be the highest since 1985-86 and the third highest since 1982. Previous highs were 1984, 38 million hundredweight, and 1985, 49 million hundredweight. The previous 10-year ending stocks average was 23.8 million hundredweight, and the previous five-year average was 22.3 million hundredweight.

• Long-grain rice 2016-17 average June farm price is estimated in a range of $10 to $11 per hundredweight, up 50 cents from the previous month, which compares to 2014-15’s $11.90 and 2015-16’s range of $10.90 to $11.10 per hundredweight.

• See slide show No 1: U.S. All Rice, Long Grain and Medium Grain Supply and Demand Estimates.

June, 2016-17 World Rice: Key Points

• World rice harvested acreage is up 1.6 percent at 161.1 million hectares (398 million acres) from 2015-16. The May acreage estimate was 160.6 million hectares. The record world rice acreage was 161.8 million hectares (400 million acres) in 2013-14.

• Rice production is estimated at a record 480.7 million tons, unchanged from the previous month and 9.8 million metric tons greater than 2015-16. The previous 10-year average was 456 million tons and the previous five-year average was 474 million tons.

• World rice trade, at 40.6 million tons, is slightly below last month’s 40.7 million tons, and trade continues to decline from 2013-14’s 44.1 million tons; 2014-15, 42.8 million; and 2015-16, 41.4 million. Global softness of the current magnitude has a tendency to cause countries to focus on food self-sufficiency.

• Rice total use is forecast at a record 480.4 million tons, slightly below last month’s estimate of 480.5 million tons and 1.7 million tons above 2015-16.

• World rice ending stocks of 106.9 million tons are slightly above the previous year’s ending stocks of 106.6 million tons.

• See slide show 2: World Rice Supply and Demand Estimates.

Additional Resources:

• World Agricultural Supply and Demand Estimates Report (WASDE)

• WASDE Secretary's Briefing

• Rice Outlook: June 2016

Robert Coats is a professor in the Department of Agricultural Economics and Agribusiness, Division of Agriculture, University of Arkansas System. E-mail: [email protected].