'Monster’ El Nino showing similarities to 1997-98 marketing year: Part II

Bobby Coats says the “Monster” El Nino of the winter of 2015-16 is shaping up to be very similar to what happened in 1997-98. Because of the weather associated with the phenomenon, long grain rice supplies fell and prices rose that year.

“2015 has many similarities to the 1997 and 1998 period where there was a significant demand for U.S. long grain rice,” says Dr. Coats. That’s because the rice crops in several countries which normally export rice were negatively impacted by the weather phenomenon.

World rice consumption continues to trend higher, reaching 484.5 million metric tons in the 2014-2015 marketing year. That’s compared to world rice production of 469 million metric tons in 2014-15. “Thus production is lagging demand,” he notes.

World rice trade, which includes shipments between exporting and importing countries is expected to have reached 41 million metric tons in 2014-15, which is down slightly from 42.4 million in 2013-14 and 43.3 million in 2012-13.

World ending stocks are also declining – to 88 million metric tons for 2014-15 – which is also a positive for world prices. The last time world ending stocks were as low as 88 million metric tons was in 2007-2008 when riots occurred over high rice prices in southeast Asia.

“Given likely global events, there are more reasons to be bullish than bearish on trade,” said Coats, who moderates the University of Arkansas Systems Division of Agriculture Food and Agribusiness webinars that have been presented throughout 2015.

“The global economy faces huge economic headwinds in 2016,” he notes. “Increasing levels of global stimulus will emerge as the year progresses, and this could be bearish for bonds and bullish for hard assets such as many stocks, commodities and others. Near term U.S. Treasuries must finish consolidation and hard assets need to finish a bottoming or consolidation.”

Coats believes the Dow Jones Industrial Average is currently consolidating and will complete the consolidation process and break out of its current trading range in 2016. “That will help provide leadership for the commodity sector.”

For more information on presentations at the USA Rice Outlook Conference, visit http://usarice.com/about/meetings/meeting-registration/2015-presentations.

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