As with other crops, the news regarding where the rice market is headed isn't particularly appealing. The rice market continues to function under a lot of pressure.
“The futures market has continued to go down. November contracted at a low of $3.48 (in mid-October). Since then the market has bounced back up a tad. However, with the January contract now becoming the lead month, it appears the market is again headed back down to the same area it was before. The last few days haven't been good for anyone looking for a positive sign,” says Gene Martin, senior market analyst for Arkansas Farm Bureau.
Martin says there isn't anything to suggest that over the next 10 months to a year growers will see any kind of substantial improvements in the market. “First of all, we're facing a projected carryover that's grown. I'm not sure of the exact number but there's a projected carryover of 40 million hundredweight compared to recent carryovers in the 20 million-plus hundredweight range.”
According to USDA October rice productions estimates, this year's crop is 208.2 million hundredweight. The U.S. rice crop is harvested or close to finished, so that number should be close to final.
“Utilization is right at 200 million hundredweight. The domestic side will take 120 million hundredweight with exports around 86 million hundredweight. So we're using about as much rice as was projected, and we'll import some rice for specialty needs. That's why we'll see carryover going up some.”
There's not any indication there will be any movement in the export market beyond the 86 million hundredweight projected, says Martin.
“As a matter of fact, I think the industry will have to scramble to reach that 86 million. With that being the case, there isn't much upside potential in the market.”
Internationally, there are ample supplies of rice available. Martin says Vietnam moved a lot of its stock out and is out of the market for the time being. Thailand, India and Pakistan all have excess supplies weighing heavily on the international market.
“There was a little improvement in the adjusted world price for a couple of weeks. But on Nov. 6, I noticed the adjusted world price went back down. We're back to everyone being competitive in the export market.”
Does Martin have any advice for rice farmers on how to approach the market?
“If a farmer has a bit of time he may want to use the loan and look for an opportunity to take a fairly good LDP. That's fairly substantial currently. Then they can wait for a little upturn in the market to capitalize on.”
Farmers should stay close to the market and watch it with an eagle eye, says Martin. No one is going to hit a home run but at some point, “we will hit a bottom and an upturn will come. When that time arrives, farmers need to be positioned to take advantage.”
“Other than that there just aren't a lot of recommendations to give. There may be some niche markets that need filling, but those will be pretty sparse. Overall, though, there isn't a whole lot farmers can do to get above the loan level for rice.”
For the last four years, Martin has worried about speaking at the off-season meetings. He's been sharing bad news for too long.
“The harsh truth is that there just isn't a whole lot of bright news to share. Rice is at the lowest price levels — as are plenty of other crops — that they've been at in years and years. This has been another tough year for farmers and next year looks poor right now. Without new farm legislation to assure lenders where farmers stand, there may be a bunch of growers that can't get financing.”