RGA Market Update

Our worldwide efforts taking your rice into Premium Markets
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Our Worldwide efforts taking your rice into Premium Markets.

In todays market we know our responsibility is to keep you informed with clear market updates and streamlined communication, all the way from the buyer to you.

RGA Market Updates: All of our marketing efforts are designed to put you and your family first. We hope you enjoy our market updates and call our office for more information.

RGA of California Market Update: Spring 2018

California rice prices have been steadily increasing as we enter the spring planting season. There is only a small amount of uncommitted rice from the 2017 crop in grower’s hands. Cash prices for the 2017 crop have improved to $17 over, with some trades reportedly at higher values.

Our state received a wet March and first half of April, which has boosted storage in our major reservoirs. 2018 crop CA planted acres are still uncertain at this point. There are 2 main factors that can lead to a decrease in planted acres.

  • A proposed water transfer on the east side of the valley with some of the Feather River water districts would lead to the fallowing of many rice acres. The total number of acres that will be fallowed is still uncertain at this point. Water transfer prices are reported to be attractive.
  • If the spring season continues to stay wet, there is the potential we could see some rice acres go to prevented planting. The weather over the next month will be the determining factor.

The USDA released its Prospective Plantings report on March 29. They estimated total California rice acres at 440,000, of which 385,000 acres will be medium grain, 50,000 acres will be short grain and 5,000 acres will be long grain rice. The general consensus of most in the CA rice industry is that USDA’s estimate is lower than reality. Many believe acres will be at or near 500,000. For a more thorough update on the Prospective Plantings report please click here.

The USDA issued its March 1 Stocks report a few weeks ago. California rough rice stocks in all positions on March 1, 2018 totaled 19.31 million cwt, down roughly 32 percent from the total on March 1, 2017 which was 28.51 million cwt. Milled rice stocks on March 1, 2018 totaled 950 thousand cwt, which is up slightly from the total on March 1, 2017 of 924 thousand cwt. California rice stocks are currently well below average and we expect minimal carryover as we enter the 2018 marketing year.

For the United States, rough rice stocks in all positions on March 1, 2018 totaled 83.4 million cwt, down 22 percent from the total on March 1, 2017. Stocks held on farms totaled 12.6 million cwt and off-farm stocks totaled 70.8 million cwt. Long grain varieties accounted for 70 percent of the total rough rice, medium grain accounted for 28 percent, and short grain varieties accounted for 2 percent. Milled rice stocks in all positions totaled 5.46 million cwt, down 12 percent from a year ago.

RGA of California Market Update: Winter 2018

Prices for California rice have seen great improvement from last winter. RGA’s paddy sale to Turkey in February 2017, followed by a 2nd paddy sale to Turkey from another CA marketer in March contributed to the run in prices for California rice. Paddy prices were given another real boost when the 2017 crop plantings were greatly reduced due to the wet spring we experienced. California managed to sell over 50 million cwt of paddy rice throughout the 2016 marketing year, albeit at mostly low prices, which led to minimal carryover to begin the 2017 marketing year.

Yields for the 2017 crop saw a decrease of roughly 10% from average and the quality is slightly below average, which has led to tight supplies. There is also only a small amount of available rice in grower’s hands. Prices on the Japanese MA business started the year at around $11 per cwt paddy value and have recently improved to over $14, while business from South Korea has been steady.

Stocks of California rice are currently below average and we expect minimal carryover as we enter the 2018 marketing year. 2018 crop planted acres are uncertain at this point, mostly due to low water levels at Lake Oroville. If Oroville does not fill, we will likely see a decrease of over 50,000 acres. If it does fill, we will likely plant a full crop of around 550,000 acres.

Australia’s 2018 rice crop is expected to be about the same size as 2017, which ensures they will have moderate exportable supplies. We also expect an increase in plantings of Southern medium grain as long grain prices remain low. Though the U.S. and China phytosanitary agreement was signed last summer, we are still waiting for the Chinese to do final inspections and officially allow the U.S to export rice into China. We are optimistic that this will happen sometime in calendar year 2018.

RGA of California Market Update: Summer 2017

The biggest news of this summer is the opening of China for U.S. rice. This is particularly important to California rice growers for a number or reasons. California produces premium Japonica rice which is already perceived to be higher quality rice by Chinese consumers. We also have a great food safety record and can certify that our rice is GMO free. In addition, California has a freight advantage over southern rice producing areas, not only due to location, but due to the large volume of containers coming to the west coast with goods bound for U.S. consumers that need a back haul. This puts California rice producers in the driver’s seat to develop the market in China for our high quality rice. It could take several months to begin shipping our rice to China, but since the California rice crop is projected to be down by about 20% from normal, we have a year to properly set up the marketing channels before we need to market a full crop. As a whole, China consumes the equivalent of the entire California rice crop every 3 days and is the largest importer of rice in the world.

USDA released its final acreage report at the end of June. Unfortunately, it was based on a survey taken on May 1 and therefore did not reflect the magnitude of the reduced acres due to prevented planting. USDA reported that California intended to plant 499,000 acres as of May 1. Industry consensus and common sense dictates a much lower number. We estimate that about 450,000 acres are planted to rice this year in our state. That will result in a crop size of slightly over 38 million cwt of paddy. This is down from last year’s production of over 47 million cwt.

The old saying “low prices are the cure for low prices” certainly rang true this year. The majority of 2016 crop rice was sold at prices well below the cost of production. Cash prices hovered near $6 over for the first half of the marketing year. However, USDA’s March 31 stocks report showed that California had less rice in storage at the same this year than last year even though the previous year (2015) was a low production year due to drought, and a full crop was produced in 2016. Records from the California Rice Commission and milling reports both show that use in California is over 5 million cwt ahead of last year. Two cargos of 2016 rice were shipped to Turkey taking another 1.2 million cwt off the market. The market started to strengthen as it became apparent that supplies were tight and getting tighter. We saw a run up of prices this spring from under $6 to $10 over loan that effectively cleared the market of cash rice. At the time of this report, there is less than .5 million cwt held in grower hands, and that appears to be in strong hands.

Since the announcement of opening of the Chinese rice market, cash market prices in California rose another $1 per cwt, albeit with very little, if any, actual transactions to report as there just isn’t much rice to buy at this point. In addition, growers holding any rice are bullish based on all the good news after 2 years of low prices that were below the cost of production. It is important to temper all of this good news with a few bear factors. Australia produced a larger crop in 2016/17. They are projected to plant a slightly larger crop this fall as the water available for irrigation looks good. In addition, we are seeing Asian prices stagnate after a nice run up over the last few months. World rice stocks are projected to be at or near record levels this year putting downward pressure on prices. The U.S. dollar remains strong in a historical context making our product more expensive. However, it has come off its recent highs settling somewhat lower in recent weeks.

Given all of that there is still reason to remain optimistic as we will see a real increase in demand for our premium quality rice from China. Japan has also increased its purchases from California under its SBS program which has been almost dormant over the past 3 years. The Turks are still inquiring about rice, but are resistant to today’s higher prices. We should see normal sales to Korea as they slowly open their market to real trade. Domestic marketers report strong sales this year, and that segment is performing well. All in all, good reasons to believe we can return to profitability!

RGA of California Market Update: Spring 2017

The market in California seems to have found a bottom over the winter months. Mills are reportedly busy through early summer and most warehouses have shipped larger quantities than in year’s past. Only a small percentage of the 2016 crop remains in the ownership of growers and we believe most of it will change hands before the end of the marketing year. We believe a good amount of the remaining 2014 and 2015 crop supplies have sold and are moving through the supply chain.

 RGA’s sale of a 25,000 metric ton (550,000 cwt) vessel of paddy rice to Turkey is one of the variables that has supported rising prices over the last few months.

RGA’s sale of a 25,000 metric ton (550,000 cwt) vessel of paddy rice to Turkey is one of the variables that has supported rising prices over the last few months. Turkey is one of the few customers that normally purchases California rice as paddy rice and then mills it within their own country, mostly due to import duties being much lower for paddy rice than milled rice. They also have uses for any rice by-products within their country. Turkey’s location makes it a strategic hub for supplying rice through the Middle Eastern region. We have also seen the sale of a 2nd paddy rice vessel by another California marketer to Turkey that is being loaded this month, and believe it is possible that another 1 to 2 vessels of paddy rice will sell to Turkey before the end of the marketing year.

We are expecting planted acreage in California for the 2017 crop to be down from last year. It is very unlikely that any acreage will get planted in the Sutter Bypass. Some of the heavier dirt in the valley and dirt that is affected by river seepage may turn into prevented planting acres, weather permitting. At this point the prevented planting insurance payout is an attractive option, as today’s market values continue to be below the cost of production.

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