Sunday, May 8, 2016

Price of Rice Could Double

After the huge spike in late 2007-early 2008 when prices more than tripled the trend has been irregularly down until last month's heads-up from the FAO's Rice Market Monitor:


And our headline story from Barron's Commodities Corner:

Experts predict a sharp rise as bad weather ruins crops and the world’s population grows.
Even your sushi may cost more.

Drought, floods, and historically low global inventories have rice-market experts worried that the price of the grain could come close to doubling if harvests around the world continue to disappoint.
It means futures prices for rough, or unmilled, rice could exceed $20 per 100 pounds, versus recent prices for active-month futures of $11.40 on the Chicago Mercantile Exchange. Speculators wishing to gain from the potential move higher should purchase rough-rice futures contracts.

The starting point for the upward price trend is that there isn’t as much rice to go around compared with prior years. Plus, the global population has grown, adding further pressure.

“It’s one of tightest situations, especially for Asian exporters,” says Milo Hamilton, who writes the Firstgrain Rice Market Strategist newsletter. “If there is a spike in demand, they will have trouble fulfilling it.” In other words, suppliers without enough inventory may have to snap up tons of the grain on the open market to meet orders they’ve already committed to. As a result, the exporters will bid up prices.

GLOBAL INVENTORIES OF MILLED RICE are at their lowest level in years, standing at 90 million metric tons at the end of the 2015-16 season, according to estimates from the Agriculture Department. It’s the smallest stockpile since the end of the 2007-08 season, when there were 81 million tons....MORE