The U.S. rice market continues to be very quiet. Inquiries in the export market for milled product are infrequent, and only for small quantities. Purchases by paddy traders have declined, as export needs seem to be covered.

Despite lack of heavy demand long grain supplies continue to tighten, helping to push the July futures contract above the $6.00 per cwt level for the first time since mid-March.

The U.S. rice crop looks to be progressing on schedule. In the June 4 crop progress report, the USDA reported that planting is complete and 94 percent emerged. The U.S. rice crop condition also looks good, with 77 percent reporting in good to excellent condition, a 3 percent improvement from the previous week.

Under a U.S. PL 480 food aid agreement, the U.S. has given the $10 million purchase authorization to Uzbekistan for U.S. rice. The funds should allow for purchases of approximately 41,500 tons. While all classes of rice are authorized (Grade No. 5/20 percent or better), most industry analysts expect Uzbekistan to tender for medium grain No 1 quality. The tender is expected from Uzbekistan as June 8.

North Korea continues to experience severe drought. In order to help with drought relief efforts, the government of South Korea will provide North Korea with funds exceeding $92 million. The relief money will pay for drilling to reach underground water supplies.

The rainy season is expected to begin in late June, but rice farmers who hope to minimize the damage of the persisting drought conditions need water immediately.

Prices for Thai 100 percent B moved higher on Monday, following word that Iran would buy 100,000 tons of Thai 100 percent B for July-September shipment in a government-to-government deal.

Thai 100 percentB prices began dropping, however, when a government held tender for the tonnage only attracted one bidder.

The terms of the Thai government tender were seen as unfavorable by traders because the terms require bids in U.S. dollar, while payments by the government would be made in Thai bhat at the latest conversion rate by the government when the contract finalized.

The bhat has been fluctuating significantly against the dollar, posing a high risk to traders. Despite aggressive marketing efforts, the business with Iran marks the first sale by the Thai government since the March tender sales to the Philippines.

Continuing shipments to Nigeria, Malaysia, Senegal and the Philippines are working to support Thai market values. In May, Thai rice exports topped 632,000 tons, nearly 16 percent higher than April export figures.

With 2.65 million tons shipped so far this year, Thailand is on track to meet or beat last year's export total of approximately 6.6 million tons.

Vietnamese rice prices are steady to slightly lower, supported by shipments to Africa, the Philippines, and Malaysia. Negative price pressure is building as new demand has slowed and supplies are increasing in some parts of the Mekong delta from the spring-summer crop harvest. Larger amounts of spring-summer rice will come into the market in July.

Vietnam was unable to come to a deal with Iran when an Iranian delegation visited Vietnam on Friday.

The Pakistani rice market is firm. Limited supply left in the market, an expected drop in output for the new crop, and a possible sale to Kenya are all working to boost prices. The Pakistani government has actively been persuading producers to plant cotton and sugar cane instead of rice due to water shortages. Acreage this year is expected to be well below the 2000 level.

Demand for Indian rice remains weak. Following the Indian government's price announcement for the 3 million tons of rice designated for export, rice prices have fallen, and traders are reluctant to make any large deals before prices stabilize. Traders are watching to see if the government will make any sales. There are some reports that the Indian government is aggressively pursuing sales to various African countries.

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