Rice market digests so-so world crop

Yields of the early rice crop in Arkansas this year were good and in some cases very good. However, yields became more variable as harvest progressed.

The best assessments are that the last half of the crop would not be as promising as some of the yields for the earlier crop.

There were reports from some sources that Arkansas is harvesting a bumper crop. It looks more like a bent fender crop right now as I write this. I’ve heard about money problems and producers cutting corners on fungicides and nitrogen.

Everyone knows these things make a crop green but some producers lacked the green in their wallets to buy them this year. We are still behind the yield curve.

Back in early May, some were forecasting a 5 percent increase in rice acreage while our sources were thinking it would be down 12 percent or more.

We’re probably looking at a 190 million hundredweight crop, which is about where we pegged it on May 13. The biggest swing is out of Arkansas.

I wish we could have had reliable reports earlier in the season. We have been shocked by the eventual acreage cut this year, the rice stocks in August and now the rice yields in Arkansas. It has given rice futures goose bumps in the last five months.

Enough of the market spin in Arkansas, what about the world market situation and its inevitable spin factors?

Thailand had a coup in 2006, and the bears in Asia are saying this changes everything. Will the Thai government stop supporting prices? What will happen to prices?

After another Thailand coup in 1992, the price of rice plunged over the following 12 months. But the price fell because the Vietnamese government jumped into the market, dumping rice in 1992 and in 1993.

Now the opposite is the case, Vietnamese prices are rising; they are running out of rice and may have lower production this year and next. I believe prices will be up in 2006-2007.

Thailand is not alone in supporting higher rice farm prices. India, China and Indonesia have all gotten on the rice support bandwagon.

The world market price in local markets continues to edge higher at the wrong time of the year — as we are moving into the main crop harvest for Asia. Prices are moving higher because production is not going up much in China, Indonesia or in Vietnam.

Rice production is going up in India, which is the good news for India. Government rice procurement is up in India, which is double good news. India has also become a huge importer of wheat, just when Australia’s wheat and rice crops may be lowered by 50 percent or more this fall.

It is best to think of this situation in terms of food grains. We are in a food grain bull market and the current El Niño has crunched out hurricanes in the Atlantic and hurt the Australian wheat crop. If this El Niño stays around through 2007 — and remember we have had El Niños that lasted awhile — then it could bump into India next summer and turn their rice crop from bumper crop to a bent fender as well.

The El Niño forecast has gone from mild to moderate, and its impact has been like a punch in the face for global food grain production around the Pacific region so far this year, and it is still gaining momentum.

This is why I like El Niños. There is an agreed upon database and the science is relatively straightforward. Every El Niño forecast has the name of the forecaster tied to it. If only Arkansas rice forecasts could be so clear-cut.

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