In the United States, all eyes are on the cost of inputs. Inflation and rising energy costs were two factors long before Russia invaded Ukraine, and both have been exacerbated by the conflict. Again this week, inflation hit a new high of 7.9%, and fuel, even red diesel for farms, is at all-time highs.
Just a few weeks ago, there was cautious optimism that the U.S. long-grain rice crop would be able to sustain planted acreage from last year, but that hope is quickly fading as costs inputs are growing faster than at any time in recent history. It would not be an exaggeration to say that the US long grain harvest will drop another 15% this year. In 2020, planted acres were 2.96 million acres.
Last year, in 2021, planted acreage fell 17% to 2.53 million acres. This year, we can expect another 15% drop, down to 2.15 million acres. This helps explain why long grain prices have regained stability despite the lag in milled rice exports.
Paddy exports have been strong, which is the norm, but domestic milling activity has been the real shining star this year. Mill exports to Haiti stabilized after the country’s implosion months ago and generated steady grinds.
Iraq would be a saving grace, but right now domestic activity coupled with a short harvest and drought in South America is providing enough support to keep prices firm in all growing regions, and even provide some support for the pricing of new crops, although it is not in the ground yet.
In South America, Brazil is particularly affected by the Russian-Ukrainian conflict. Brazil imports more than 80% of its total fertilizer needs and almost 100% of its nitrogen fertilizers from Russia.
To circumvent the obvious concern and ensure the supply of fertilizer for future crop cycles, the Brazilian government has announced a National Fertilizer Contingency Plan in which it aims to be able to produce 40% of its own fertilizer. by 2050. The problem is that only Brazil currently produces around 4% of its own nitrogen fertilizer.
This concern is obviously compounded by the drought and creates an expectation that the harvest of their crops of soybeans, corn, sugar and rice will be lighter both in area and yields. This is one more reason why American farmers will switch from rice to soybeans; Chinese demand for soybeans does not fade with acres reduced by drought or yield reduced by lack of fertilizer.
In Asia, Thai prices soared to over USD 410 this week, again due to the fluctuation of the Bhat. Over the past three months, Thai prices have increased by 7%. Vietnamese prices are holding steady at just over $400 pmt, and over the past three months have fluctuated less than 5%. India and Pakistan tell the same story, but at prices lower by around $360 pmt over the past three months and in the current cycle.
The USDA’s weekly export sales report shows that net sales this week of 36,700 tons were down 48% from the previous week and 61% from the previous 4-week average. Increases mainly for Mexico (14,700 MT), Japan (13,300 MT), Nicaragua (5,400 MT), Canada (2,500 MT) and Guatemala (1,500 MT) were offset by reductions for Costa Rica (1,500 MT).
Exports of 21,600 MT were down 73% from the previous week and 74% from the previous 4-week average. The destinations were mainly to Haiti (15,300 MT), Canada (3,200 MT), Mexico (2,000 MT), Taiwan (300 MT) and Hong Kong (200 MT).