RICE PRICES SUNK BY NEWS OF U.S. RICE IMPORTS FROM VIETNAM: Issue 26 Mar 17, 2013

By Jack Scoville, The Price Futures Group

Futures showed diverging trends in the market action last week. Price weakness was shown in the soy complex and rice, while corn and wheat showed strength.

The speculators, led by the funds, were the biggest players on the week and forced the moves, but they had the fundamentals behind them to support the directions that the prices took.

The downside leader on the week was rice. Rice broke a trend line on weekly charts that had held for about three years, and it was for this reason that futures went down hard on Wednesday and Thursday.

There was news that created the initial selling. ARI, an international rice trader with headquarters located in the U.S., announced that it was importing about 13,000 metric tons of Vietnamese rice into Texas.

The news highlights just how high prices are in the west when compared to those in Asia. It also shows just how tight the situation is in Texas, where a big Latin and Asian population is located. The amount imported is not particularly large. But just the idea that imports are coming and the situation here could ease caused the speculator selling.

Futures were able to recover a bit on Friday and might recover more this week, but some damage has been done to the charts and to the psyche of the market now. Longer term, farmers will be inclined to plant less rice this year, so prices in the U.S. are likely to stay higher for a longer period of time after the futures move this week. Even so, it seems that rice buyers got a gift last week and should not turn down the chance to get some cheaper rice booked.

The soy complex was the other market to see selling pressure last week and the selling pressure in these markets could continue longer than it should for rice.

China only bought new crop soybeans last week, and it waited until late in the week to close the sale. No current crop sales were announced, and it seems that there might not be any new sales soon.

We hear that China is now trying to unload some purchases it made earlier in the year in Brazil back into the world market but is finding takers as the wait times in parts down there is still at least 50 days.

We are advising buyers to stay with a hand-to-mouth posture for a little while longer. The soybeans will eventually flow from the south, and this will not be good for U.S. prices.

In fact, it now looks like Brazil could export right through the U.S. harvest season and that could create even lower prices than many analysts are willing to admit.

The soy complex should be interesting to watch, and buying only to cover immediate needs still seems like the best strategy.

Wheat was the upside leader of the markets last week. A strong export sales report issued on Thursday surely helped, as did continuing ideas that U.S. soft red winter wheat is about the cheapest in the world.

We are not so competitive for hard red winter or spring, but we are getting some business there too, because we can ship and the wheat is available.

There has also been a sharp increase in domestic demand. Burlington Northern reduced shipping rates from the Midwest to the southern Great Plains in an effort to capture more shipping of SRW to feed lots in Texas.

It is no surprise that the leader of the futures was Chicago because of this news. Kansas City and Minneapolis futures lagged a bit as demand has not been so strong there and the weather is slowly but surely improving in the Great Plains as winter crops start to break dormancy.

Corn was stronger during the week, but not quite as strong as wheat. Corn is almost completely a domestic market these days, even with some improvement in export sales last week.

The rally in corn futures created some new farm selling which did nothing to weaken cash market basis levels but did keep futures somewhat weaker than wheat futures. Feed demand is still there, and ethanol demand seems to be increasing as processors start to come on line again.

Any feed demand lost to wheat will probably shift to the ethanol side now. There should not be a lot left for farmers to sell, but there is some out there to be moved. Futures should hold strong overall and cash should too until the farmer has sold the last of his crop.

PHILIPPINES JOINS ELITE CLUB OF RARE EARTH METAL PRODUCERS
By Rene Pastor

The Philippines is going to become a producer of a rare earth metal early next year, joining a small group of countries producing metals that are critical to the running of gadgets like cell phones and night vision goggles.

China is the dominant producer of rare earth minerals. But ever since Beijing limited the export of rare earth minerals, annoyed developed countries led by the United States have ratcheted up the search for other sources of the minerals.

Japan’s Sumitomo Metal Mining said it is going to build a pilot plant at its majority-owned nickel mine on Palawan island to produce the rare earth metal scandium, a silvery metal that could be used to strengthen aluminum alloys for industrial uses such as metal halide lamps or alkaline batteries.

The Philippines is one of the most highly mineralized countries in the whole of Asia. Finding rare earth minerals in the country would make the country even more attractive for mining firms given the premium commanded by such minerals in industrial applications.

Around 14 rare earth minerals are used by a variety of industries. They are difficult to find in commercial quantities.

But the minerals are vital because they are used in things like night vision goggles, the colors that light up the screen on a cell phone, or in cars where they are used to run power windows and seats among others uses.

Sumitomo said the scandium recovery pilot plant will be built at its subsidiary, Coral Bay Nickel Corporation, on Palawan.

Scandium is produced in only three mines in the world – the uranium and iron mines in Zhovti Vody in the Ukraine; the rare earth mines in Bayan Obo, China; and in the apatite mines on the Kola Peninsula, Russia.

The plant will be constructed “by the end of 2013 and for trial production to get underway at a level of 10 kg per month in 2014.”

“The company will aim for construction of a scandium oxide production line of commercial scale and the launch of related business in 2015,” the Sumitomo statement added.

World production of scandium is estimated at 10 tons per year. The use of the metal is expected to increase as more deposits of the metal are developed.

PHILIPPINE RICE STOCKS DIVE ALMOST 20 PCT, STOCKS AT 4-MONTH LOW
By Rene Pastor

Rice stocks in the Philippines dove nearly 20 percent to hit its lowest level in four months, and there are only enough stocks for just over a month’s consumption in government and commercial warehouses, government figures showed.

The Agriculture Department’s Bureau of Agricultural Statistics said that as of Feb. 1, rice inventories in commercial warehouses were only enough for 16 days of consumption while stocks in government warehouses would last for 17 days.

Household stocks stand at 26 days, but they are out of reach of the market. Daily consumption in the Philippines of rice, the daily staple of its nearly 100 million people, stands at around 36,000 metric tons.

As a matter of policy, rice inventories should be equal to two months’ worth of consumption. This would increase in the Philippines to three months’ worth during the seasonally lean third quarter of the year.

The total rice inventory on Feb. 1 stood at 2.02 million tons, down 19.8 percent from the January 1 figure of 2.52 million tons. It is the lowest stock level since Sept. 1, 2012, the BAS figures showed.

The government of President Benigno Aquino has launched a drive to make the Philippines, one of the world’s top importers of rice, self-sufficient in the grain in 2013.

But most analysts believe the Philippines will not hit the target because surging demand will not be matched by the harvest in the Southeast Asian nation, given low yields when compared to its Asian neighbors and limited acreage that can be planted to rice.

The Philippine Commodities Digest estimated total rice imports in 2013 will reach at least 750,000 tons, with the possibility they would reach 1.0 million tons.

Agricultural experts at the U.S. embassy in Manila forecast imports of 1.5 million tons in 2013, unchanged from the level hit in 2012.

Consumption of rice in the Philippines is also being boosted by the free-wheeling spending normally seen during elections in the country. Midterm national polls are scheduled for May.

WEEKLY GRAIN MARKET NEWS FROM THE USDA IN THE PACIFIC NORTHWEST — March 14

There were 13 grain vessels in Columbia River ports on Thursday, March 14, with five docked compared to 12 last Thursday with five docked. Two weeks ago, the number was 16 with seven docked.

Confirmed new export sales were to Japan and the Commodity Credit Corporation.

Japan purchased the following wheat in metric tons (mt): 21,009 of maximum 10.5 percent protein western white wheat for April 21 to May 20 shipment as well as 23,064 of 11.7 percent protein hard red winter wheat and 20,940 of minimum 14 percent protein dark northern spring wheat for arrival by June 30.

The Commodity Credit Corporation of the USDA purchased 52,080 mt of minimum 9.5 percent protein soft white wheat for export distribution to Bangladesh under the PL 480 Title II program, shipment is for April 1 to 15.

Outstanding U.S. white wheat export sales as of March 7, 2013 for the marketing year beginning June 1, 2012 and ending May 31, 2013, totaled 782.0 thousand MT compared to 726.3 thousand MT on February 28, 2012, and 1392.4 thousand MT one year ago.

Outstanding white wheat export sales for the 2012-2013 marketing year were to the following countries in 1000 MT:

Japan 135.3
Philippines 121.0
South Korea 107.8
Egypt 55.0
Yemen 45.0
Thailand 38.0
Taiwan 23.5
Nigeria 19.2
Burma 3.0
Malaysia 2.0
Canada 1.7
Vietnam 1.0
Total unknown 229.5.

Accumulated white wheat export shipments as of March 7, 2013, in 1000 MT for the 2012-2013 marketing year, totaled 3672.5 compared to 4172.6 one year ago.

PALM OIL OUTLOOK: MARKET DIRECTIONLESS BUT AMPLE SUPPLIES COULD WEIGH ON VALUES
By Jack Scoville, The Price Futures Group

Palm oil traded higher and lower over the course of the week, and ultimately did not settle on a direction. The market wants to be fundamentally weak as traders still anticipate good supplies against uncertain demand.

Palm oil traders look west and see big exports that will flow sooner or later from South America and wonder how palm oil at current prices can compete. They also worry about demand from India and China. India seems to have a lot of vegetable oils already in the country, and there are worries about the Chinese economy and demand potential.

Palm oil seems content to follow soybean oil for now as it seeks to hold competitive pricing.

Supplies in Malaysia and Indonesia are dropping a bit these days, but there is still plenty of it around so any big rally probably depends as much on what happens in the soy complex as anything. And right now, the soy complex does not act particularly strong.

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