Who, if anyone, do you rely upon for advice on the rice market? Do you think the smartest person in the room is a rice buyer? Or, perhaps it's your uncle who knows it all because he talks to just about everyone that knows anything? Or do you follow some other source of rice market advice?
I was a rice buyer for 18 years and I did not share my thinking much outside my corporation with others back then.
I have been buying and then advising on rice for more than three decades. I advise but I do not trade the rice market; nor do I take brokerage commissions.
When I was a rice buyer, I worked with several brokers, but I did not ask their opinion of the market, nor tell them mine. That was not their job. Their job was to help me execute futures trades or help me buy cash rice. You can trade on a computer now, but, if your life is busy, a futures broker can be a useful friend for your hedging program.
Each year is a bit different and the market we find ourselves in now is about as difficult as it has ever been to maneuver around. The future of the trade in rice between nations is uncertain, for example.
Most who attempt to give you a forecast must first convince you that they know what they are taking about. Perhaps they rattle off prices from exotic ports of call and talk about the look of the charts. But do they follow the seasonal action of your local basis? Do they understand why competing export origins do what they do? Do they collect seasonal prices over many years?
Think a bit about what drives the long-grain rice price in the Mid-South. I will give you a hint: it does not start in the Mid-South.
Three key forces in the rice market shape the price direction. The first is Asia, India and China in particular. The second is our hemisphere and its exporters; the third is trade preferences and agreements, which are in transition.
Most look at the rice stocks in the U.S. and if they are high and the Asian price is low, they get bearish. Many felt that way this spring and summer, only turning bullish when USDA trimmed its stocks estimate and the price trended higher.
But they overlooked the dramatic shrinkage in rice stocks in South America. And guess what? The price went higher, not just in the U.S. but also Brazil, the two largest rice markets in the Western Hemisphere. For this reason, even without the problems with growing the crop here, back in February 2019, I saw better prices ahead of us.
Here are three general rules of thumb about the rice market:
• When stocks of long-grain rice in South America are getting tighter, more business should come to the Gulf Coast. That has been happening this fall.
• Once a shortage develops, it cannot be relieved until next fall with the U.S. harvest and then in early 2021 with the Brazil harvest.
• If a trade truce is made between China and the U.S., soybean price moves up; a higher bean price would subdue the rice acreage expansion in 2020.
You can have high prices in the West and low prices in the East.
I plan to speak on the rice market at the 68th Annual Mid-South Farm & Gin Show in Memphis on Feb. 28-29. See you there. A lot can happen between now and then, particularly between China and the U.S.