In my last article I explained why I’m bullish long-term on the price of rice and focused in on China. Here, I bore into India in a bit more detail. I also note that rice futures are almost worthless to farmers at this time of the year.

For the last few years, the rice price has sat at the bottom of the price range in Asia and the United States. I want to talk about the Western Hemisphere rice markets, and then turn to Asia where all rice price trends begin and end. My conclusions might startle you -- at least that’s my hope.

The strong dollar is very good news for farmers in Brazil as they are getting record prices for corn. The rice now beginning to come out of the field carries a pretty stout price, as well. That is the good news.

The bad news is the rice crop has been hit by bad growing weather and the economy is a mess; farmers cannot get the credit they need to buy the inputs they need to deal with bad weather. Blight is everywhere as a result. You never know what a rice crop is until it comes out of the field but it doesn’t look too sporty “down under” in February.

In the United States, rice farmers are staring at a bunch of row crops that offer little profitability. Credit is also now a challenge as we move into a second year of cheap grain prices. Rice looks like the lesser of several evils as we approach planting which could lead to more rice in 2016. That means the U.S. and Thai price must converge in the next six months. Any profitability in 2016/17 must come from the trend higher in the Asian rice price.

Matter of faith

The bad news now is that Thai rice is about $80 per MT cheaper than U.S. rice as a milled export item. Some are asking me if it pays to grow rice this year and what the rice price will do. Well, planting rice is a matter of faith at this time of year regardless; it’s the only grain crop farmers cannot book at planting because futures are so thin in volume there is no open interest. Low volume futures create liquidity problems for options as well.

You can book wheat at planting but not rice. Since 1995, and especially since 2009 when wheat made three strategic contract changes, wheat volume has gone up five-fold. Since 1995, rice futures have made no changes at all to both the contract and rice volume.

Is this a coincidence? I think not. As Albert Einstein said, "Insanity: doing the same thing over and over again and expecting different results."

The only way to short the rice market is to not plant the stuff, which I believe is an unwise decision in 2016 because of the farm program and because of what is happening or should soon be happening in Asia.

Will US rice prices drop $40-80 per MT by harvest and cause a profit rip in the US rice farming industry in 2016/17? That has to be the big fear in all our minds.

Here are some events I predict in 2016. If you will, please think about them prior to the Mid-South Farm & Gin Show in Memphis when I’ll speak at 1:30 on February 27. I’ll take these events and try to fit them together so in March you’ll have my current idea of what could happen to the U.S. rice market price for the rest of 2016 and beyond.

Unless the Asian rice market has repealed the economic laws of demand and supply, the rice price must rise, as in up.