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Agricultural and Food Policy
 Agri Outlook
Radio
Number 100
The USDA’s Foreign Agricultural Service Makes Bullish Points on Global Rice Situation and Outlook (6:45 minutes)
Audio/Video Script:
Dr. Bobby Coats
Extension Economist
University of Arkansas, Division of Agriculture
U.S. long grain rice ending stocks are estimated at 13.2 million cwt.
significantly below the previous marketing period’s 28.5 million cwt. and
USDA’s Foreign Agricultural Service makes bullish points on global
rice situation and outlook. I’m Bobby Coats Extension
Economist University of Arkansas Division of Agriculture.
USDA’s November rice projections showed the following:
- USDA raised their 2007 U.S. long grain production
projection from 142 million cwt in October to 142.6 million cwt. This is the
lowest U.S. long grain production since 2000, but still the 8th largest
on record.
- Total long grain supply was increased from 185.5 million cwt in
October to 186.2 million cwt. which is the lowest since 2003, but still the
sixth largest on record.
- U.S. long grain exports were raised from 83 million cwt in
October to 84 million cwt, which is above the last marketing period’s 72.6
million cwt and if achieved would be the third largest on record only
exceeded by the marketing periods 2002 and 2005.
- U.S. long grain total use is projected at 173 million cwt the
3rd largest on record and above the 2006/07 marketing period’s 164.6 million
cwt.
- U.S. long grain ending stocks are estimated at 13.2 million cwt
significantly below the previous marketing period’s 28.5 million cwt. and
more in line with a normal ending stocks expectation.
The USDA’s Foreign Agricultural Service makes bullish points on global rice
situation and outlook.
- First, USDA projects record world rice exports in 2008.
- Second, world rice export prices have continued to strengthen
and the value of the dollar has dropped. Regarding the dollar will it remain
weak, start strengthening, or show additional weakness? Given the extreme
global bearishness on the dollar, at the very least one could expect some
immediate strengthening, but the sustainability of the strength remains in
question.
- Third, since September, price quotes for U.S. rice have jumped
$66 per ton to $478 per ton, the highest since 1994.
- Fourth, FAS points out U.S. export commitments are 44 percent
higher than a year earlier, which is a primary function of heavy forward
buying by regular customers.
- Fifth, Thailand rice quotes are up $8 per ton from the previous
month to $340.
- Sixth, it is important to note that world rice prices are also
being supported by export bans imposed by Vietnam (on all their rice) and India
(on non-basmati and high-value rice only). Given these bans Thailand, the
United States, Pakistan, and China become the major suppliers of rice to
world markets.
- Seventh, USDA expects global export prices will likely remain
strong throughout 2008, as global ending stocks in 2007/08 marketing period
are projected to be the smallest in 25 years.
Now, turning to the price outlook for U.S. long grain rice, the U.S. Federal
Reserve’s rate cuts to date have been bullish for global growth and global
economic momentum. This maintenance of global growth and momentum continues the
strong demand for commodities including food, feed, and fiber. But problems
exist. Fed rates cuts are creating weakness in the dollar with inflation
concerns being a by-product. The Fed will face increasing pressure on meeting
the challenge of how to maintain domestic growth without fueling domestic
inflation, which leads me to believe that the Federal Reserve at their next
meeting on December 11, 2007 will announce no change in the interest rate before
continuing to lower interest rates in the future. I make these points to say
that the domestic and global economic setting remains bullish for commodities,
so in a very liquid global marketplace with an abundance of short term
speculative activity, one should take advantage of pricing opportunities.
Remember commodity markets will be extremely volatile and difficult to predict.
Rice prices continue to show strength and the trend remains up. Will the
trend continue? I do not know but caution is advised. Old crop wheat is giving
the appearance of having topped, but only time will tell. New crop wheat may
still have some upside. My expectation is that soybeans and corn are in the
process of moving above their previous highs, which raises the question will
higher soybean pricing opportunities cause some low yielding rice land to be
planted to soybeans? The answer is yes, because the rice cost of production
simply remains too high for many rented below average yield acres to remain in
production. Cotton prices have continued to struggle for an array of reasons,
but should start showing price strength in the future.
I continue to see more positives than negatives in the U.S. and global
economy, which will continue bullish for commodities over the longer run, but
individual commodity markets will correct over a period of time before moving
even higher.
Commodities continue to display significant price volatility and uncertainty,
due to the dynamics of the global economic setting. I continue to believe
professional marketing assistance is advisable from co-ops or individual
marketing professionals. This has been Bobby Coats Extension Economist University of Arkansas Division
of Agriculture.
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