“Rice is one of my favorite markets right now,” said Jack Scoville, vice president, Price Futures Group, during a Chicago Board of Trade press briefing on the USDA estimates. “The demand profile for rice is very strong. I’m hearing about new inquiries from South America already. I understand they have several hundred thousand more tons that can be bought there.”

The bottom line is that rice could trade a lot higher, according to Scoville. “I’m not sure when that begins. The market has been in a correction mode after the big rallies we’ve seen over the last few months. Now we’re ready to look ahead with the new crop coming on. The ending stocks estimates were trimmed quite a bit in the USDA report and justifiably so.”

It’s possible for rice prices to approach between $8 and $8.50 per hundredweight in the next few months, according to Scoville, “especially with the ending stocks estimate and demand headed where it is. I think contract highs are in jeopardy sooner or later.”

Production down

U.S. rice production in 2003/04 is projected at 195 million cwt, down 4 million cwt from last month and about 16 million cwt below 2002/03. Estimated harvested area of 2.97 million acres is 46,000 acres below last month, 240,000 acres below 2002/03, and the lowest since 1996/97.

Exports for 2003/04 are projected at 87 million cwt, down 1 million cwt from last month and 33 million cwt below the revised 2002/03 estimate. Ending stocks were projected at 17.5 million cwt, down 5 million cwt from last month, about 3 million cwt below the revised 2002/03 estimate and the lowest stocks since 1980/81.

U.S. exports for old crop rice were forecast at a record 120 million cwt, 3 million cwt above last month. Rough rice exports for 2002/03 were increased to a record 45 million cwt and combined milled and brown exports (rough-equivalent basis) were raised to 75 million cwt, up 1 million cwt and 2 million cwt, respectively, from a month ago.

Global rice production for 2003/04 is projected at 394 million tons, slightly above last month's largely trend-based projection, but nearly 13 million tons above 2002/03. Global consumption for 2003/04 is projected at a record 412 million tons, slightly above last month and 2002/03.

Global consumption is projected to exceed production for the third consecutive year, resulting in a further drawdown in stocks to 88.6 million tons, 3.5 million tons below last month, 18.1 million tons below 2002/03, and the lowest stocks since 1984/85. Global exports in 2003/04 are projected at 25.4 million tons, nearly the same as last month, but nearly 2 million tons below 2002/03.

Cotton bullish

USDA lowered projected U.S. cotton production 3.5 percent from last month to 16.6 million bales. Projected domestic mill use was cut sharply to 6.8 million bales, as indicators of both current mill activity and textile trade suggest reduced prospects for next season.

Meanwhile, USDA’s World Agricultural Outlook Board raised its export forecast 2.6 percent to 11.8 million bales. Projected ending stocks were reduced to 3.9 million bales, which is 21 percent of total use.

World ending stocks, at about 33 million bales, are nearly the same as last month and the lowest since 1994/95.

With bullish new crop news in cotton, “one is left to wonder why the market has not jumped to the 65-cent mark already,” said ag economist O.A. Cleveland in his weekly Cotton Experts comments.

Part of the reason is that new crop sales “are now in the headlines and will provide market direction,” Cleveland said. “This week’s export report show old crop sales of cotton very strong at 70,800 bales and old crop shipments of 278,000 bales. However, new crop sales totaled only 5,900 bales.

“For now, new crop exports do not carry a Step 2 payment. Thus, prices paid by mills are higher than they have been in three years, and mills are reluctant to make distant purchases. While estimates call for new crop sales to exceed the record exports of 2002/03, the market and specifically December future, will hold the 60-63 cent level until new crop exports begin to materialize.”

USDA also made adjustments to old crop numbers for cotton. For 2002/03, U.S. mill use was reduced 100,000 bales, exports were raised 200,000 bales to 11.6 million bales, reflecting atypically strong end-of-season shipments. Accordingly, ending stocks were reduced 100,000 bales.

The 2002/03 world estimates include higher production and lower consumption, resulting in an increase of nearly 2 percent in ending stocks. Production was raised in Pakistan, Uzbekistan and others and was partially offset by a decrease for Syria. Consumption was reduced in Brazil, the United States, Taiwan, and others, and was partially offset by an increase for China production.

e-mail: erobinson@primediabusiness.com