First, demand for U.S. long grain rice exports remains problematic. This is, in part, a function of quality, protectionism, nationalism, macro issues, etc.

Presently 2016/17 long grain rice ending stocks are estimated at 31.7 million cwt, the 3rd largest since 1985; the five-year average is 22.3 million cwt and a 10 year average is 23.8 million cwt. (See http://www.deltafarmpress.com/rice/rice-outlook-us-and-world-supply-and-demand-charts.)

Second, World Rice Supply Exceeds Demand

World Rice-Cliff Note Version

Third, all countries will elevate their level of protectionism in hard economic times. This is especially true of their rice sector.   

The world’s global economies are frail and filled with more risk, uncertainty and potential anomaly events than most realize. This leads most countries to focus on self-sufficiency, revisiting ongoing trade agreements or not adhering to current trade agreements, and embracing a higher level of nationalism.

Said differently, this leads to an intense security focus country after country around the world not only related to food security but also related to economic, homeland, and energy security.

Food Security: Rice’s importance in feeding the world’s population cannot be overstated. Why? These are historic economic, political and social times, at least for the modern era post-World War II. All countries strive for a high level of self-sufficiency in hard economic times, when it comes to feeding their population be damn trade agreements.

Trade: Today, there is increasingly less emphasis on globalization and increasing emphasis on nationalism with secondary emphasis on regional trade.

In today’s global economic setting countries will be increasingly supportive of their domestic rice sector, regional rice imports, and multi-lateral trade agreements, over the globalization trade model and justifiably so from a homeland security perspective.

Fourth, Global Dollar Dominance Will Grow This Year: An increasingly strong dollar over the next 1 to 2 years will be highly problematic for U.S. exports with some exports being impacted more than others.

Dollar’s Biggest Threat: The biggest near term threat to the dollar (stronger dollar) this year is from the slow motion European Union Unwind.

The United Kingdom’s vote to start the process of exiting the European Union was only the tip of the iceberg. Populist’s movements exist throughout Europe and especially in the European Union Countries where bureaucracy and heavy socialism are chocking the life blood out of countries.

French Elections: If Marine Le Pen wins the first round of the 2017 French Presidential Election to be held on April 23, 2017, but she does not have a majority, then a run-off election between the top two candidates will be held on 7 May 2017.

The point is Le Pen is riding a “Populist Tidal Wave” and she will likely be France’s next President.

The importance of a Le Pen win to our rice discussion is that a Le Pen win means the European Union Unwind will be guaranteed. The only question is how long and orderly or disorderly the breakup.

What’s the impact on the EURO and the Dollar with a Le Pen win?  

EURO: With a Le Pen win the EURO currency will likely show more weakness than strength against the dollar until its demise be that a couple of years or longer.

The dollar’s strength will become increasingly problematic for U.S. exports including rice. Now there are an array of currency relationships that will be impacted but that is a discussion for another day.

Conclusion:

If U.S. long grain rice producers overplant in 2017 given present fundamentals and no new demand source, will likely provide huge market challenges during the 2017 marketing period.

Long Grain Rice Cliff Note Version:

Please view accompanying Rice Slide Show. http://www.deltafarmpress.com/rice/rice-outlook-us-and-world-supply-and-demand-charts

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