If you think the price of rice is bad now, just wait; it’s likely to get worse.
That’s the prediction Dennis DeLaughter, President, Progressive Farm Management, made to Texas rice farmers during the 63rd Annual Beaumont Field Day Thursday at the Texas AgriLife Research and Extension Center.
DeLaughter said the fundamentals are not good for rice markets. “We’re producing more than we’re using,” he said. “And I don’t know what signal farmers saw to plant so much rice.”
He pointed to world usage and end stock figures back to 2007, when usage was 428.5 million tons and ending stocks were only 80.5 million tons. In 2008 those figures rose to 434.6 million tons usage and 92.4 million tons ending stocks. Last year usage rose again to 436.5 million tons and ending stocks dropped to 90.7.
But estimates for 2010 indicate 452.8 million tons usage but 96 million tons ending stocks. Rice farmers, De Laughter said, “planted a huge acreage.”
He said usage in the United States shows a similar pattern, 170.4 million tons usage in 2007 with 19 million tons ending stocks;168.1 million tons usage in 2008 and 20.1million tons ending stocks. Usage rose to 176 million tons last year and ending stocks dropped to 14.3.
In June, 2010, usage estimates were at 184 million tons but ending stock estimates were 25.3 and could hit 30.8 for July.
Crop conditions also favor lower prices, DeLaughter said. “Conditions in Arkansas, for instance, are 20 percent better than last year. We have a huge crop to move. I think the market is going down.”
He said market bears have a good argument for their pessimism. “The bulls also have an argument and rice farmers should know both sides. Only one can be right. But both can be wrong.”
If the bulls and the bears are both in error, he said a sideways market will result and that will offer pricing opportunities on rallies.
“But I think the fundamentals are bearish.”
He said some farmers believed the $17 price at the end of the year would hold. “They said it would not drop to $11. Now, we would like to see $11. I think the market will go lower than we thought.”
He encouraged farmers to develop a marketing plan, to know the fundamentals of the market and to include some technical details in their strategy to minimize risk. And he recommended that they follow market movements and take advantage of any rallies.