Bloomberg News

Rice Jumps to 15-Month High on Signs U.S. Inventories Tightening

February 05, 2013

Rice futures surged to the highest in almost 15 months on mounting concern that inventories are dwindling in the U.S., the world’s fifth-biggest exporter.

Stockpiles will drop to 960,000 metric tons in the year ending July 31, down 26 percent from a year earlier, the U.S. Department of Agriculture said Jan. 11. Consumers and exporters may be scrambling to purchase supplies before prices rise further, said Dennis DeLaughter, a market analyst at Vantage RM, a grain broker. Futures are up 6.4 percent this year.

“Commercial buyers need the rice, and we have a low supply in Texas and Louisiana,” among the top five growers, DeLaughter said by telephone from Houston. “There’s not that much rice left, so they’re bidding up for it.”

Rice futures for March delivery gained 1.5 percent to settle at $16.15 per 100 pounds at 2 p.m. on the Chicago Board of Trade, after touching $16.29, the highest for a most-active contract since Nov. 7, 2011.

The U.S. harvest area needs to expand by 10 percent “to alleviate current scarcity,” Shawn Hackett, the president of Hackett Financial Advisors, said in e-mailed report today. To encourage planting, the price needs to increase to $18, which would be the highest since Sept. 16, 2011, he said. Farmers may instead decide to plant soybeans or corn after both crops reached a record last year.

“The temptation by those to plant corn and beans who missed out over the last two years may prove to be too much to overcome,” Hackett said. Producers are concerned that the jump in rice prices won’t be “a sustainable move, but one that will quickly erode the second that acres have been planted,” he said.

Production in Thailand, India, Vietnam and Pakistan, the top four exporters, may total 154.01 million tons this year, down from 158.36 million last season, according to the USDA.

Growers in South America are the biggest competitors for exporters in the U.S., DeLaughter said. Cold, wet weather will probably reduce shipments from Brazil, and the country may even need to import rice, he said.

To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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