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Floods Attack Asian Rice Belt, Export Prices Not Yet Affected but Domestic Markets Start Heating Up, Financial Markets Rally – Chicago Rice Futures To Follow?

By Oryza News on October 10,2011

The story of the day is about floods which are getting plenty of attention across the Asian rice belt but no impact on rice prices just as yet. Thais nominally raised their offers by about $5 per ton showing Thai 100% B around $615 per ton although some of the Thai sellers would sell for little less if you were to show them a bid. Vietnamese dropped their price ideas by about $5 per ton, showing Viet 5% around $570 per ton. Indians are still keen sellers showing 5% milled around $480 per ton, about the same levels as last week. Pakistani numbers also didn’t change much from yesterday with most exporters asking around $500 per ton for Pakistani 5%.

While floods across Asia have failed to move the export prices or excite the rice importers, the domestic markets are starting to get roiled up in the rice belt. Some of the rice traders in Vietnam have started hoarding rice again and Vietnamese authorities are concerned enough to start talking about releasing rice from rice stocks controlled by state entities if “domestic prices rise sharply.” Domestic traders in Vietnam are carefully watching how the Thai rice market evolves in response to the Thai government’s rice buying scheme which started October 7 under which Thai government has started to pay about $480 per ton for Thai paddy rice. Viet traders are also paying attention to the floods in the Mekong Delta where seasonal floods are their highest levels in 10 years although the floods have not had any material impact on Vietnamese rice crop. Just in case, Vietnamese authorities are reminding Viet exporters to make sure they have rice stocks on hand before signing sales contracts.

So far, Vietnamese appear to have been spared the brunt of the floods. It’s the Thais who appear to have suffered the most so far from the relentless deluge of floods this year and numbers are staggering: rice loss estimates range from 2 to 4 million tons; about 2.4 million people displaced by floods; and Bangkok itself at high risk to severe floods. Understandably, Thai consumers are resorting to panic buying of rice and other groceries throughout stores in Bangkok. Problem is obviously not lack of rice but the logistics of getting rice and other food around. Thai rice packagers are telling public there is plenty of rice. Thai government says it will release 100,000 to 200,000 tons of rice from the old crop rice stocks – the rice will be sold under Thai Government’s very own “Blue Flag” brand in 5 kg retail bags for the domestic market. Understandably, Thai government is now more focused on dealing with a humanitarian crisis and for once Thai media has relaxed its attack on Thai government’s rice buying scheme which of course marches on. With Thai exporters still sitting on plenty of old crop rice, Thai export prices have not moved much despite worst floods in 50 years and the Thai government’s paddy buying scheme. However, the situation is fluid and bears close watching.

Floods or not, authorities in Philippines say “no rice imports in 2011” but “will meet again in November to evaluate our needs.”

Indians remain motivated sellers although sales are slow and country continues to bulge with rice stocks. Indian government is now forecasting a record wheat crop as well. Rice storage is likely to remain tight as Indian state agencies plan to buy a record 35.31 million tons of rice from the farmers during the  2011 – 12 crop year, compared to 33 million tons in 2010 – 2011. 

Outside Asia, although speculators turned buyers of grain futures along with most of the financial assets, Chicago rice futures continued to drift lower. Dow Jones stock market index was up almost 3%. Euro jumped up about 2% against dollar responding to German and French leaders promising to deliver a plan to recapitalize European banks and address the Greek debt crisis by November 3. As financial markets improved, soybeans were up over 2% while corn and wheat were also up smartly “because rains the U.S. Great Plains over the weekend weren’t enough to relieve months of drought.” Rice futures had no such luck as speculators pushed the market lower throughout the trading session today. 

Chartists say the price action today formed an inverted hammer candle and that this candle makes tomorrow’s action very important to follow. If the market opens strongly and remains firm during the day, then a key reversal is likely in progress and rice futures may have bottomed.

The next big event for U.S. rice futures is the latest USDA supply & demand report due this Wednesday October 12. As rice futures traded lower, rice mills and warehouse operators in the U.S. mid-South also dropped their price ideas. Farmers remain reluctant sellers and even more so at prices $2 per cwt (about $40 - $50 per ton) below where they were 2 weeks ago. The rice harvest is about 90% complete in Southeast Arkansas and Mississippi, and about 70% complete in Northeast Arkansas and Missouri. Milling yields are looking much better compared to last year with head rice around 53 – 58%. New crop rice also looks to be less chalky and shows fewer stress cracks which ought to go well with the traditional markets for U.S. rice especially if prices continue to ease lower.

Elsewhere in the Americas, Brazilian sellers who were waiting for letters of credits from Venezuela are still waiting. Brazilian rough rice price index traded up the equivalent of about $3 per ton to about $275 per ton.  In the meantime, Guyanese say they have booked 50,000 tons of Guyanese paddy and 20,000 tons of Guyanese milled rice to Venezuelan government, all at pretty rich prices.

Chinese rice futures closed at the equivalent of about $384 per ton, about $7 per ton higher than a week ago.

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