Strong export demand for U.S. rice led Chicago Board of Trade March rice futures to establish a new all-time high Wednesday, with the potential to extend prices higher, analysts said.
Light speculative buying helped push March futures to $13.45 per hundredweight _ above the previous all-time high on monthly continuous charts of $13.40. Although January rice is currently the lead month, market participants have been actively rolling out of the January contract and into March before January moves into its delivery phase, a CBOT floor analyst said.
Last week, the CBOT rice futures contract rallied to $13.34 per hundredweight before retreating as "prices got fluffy," said Jack Scoville, vice president and analyst with Price Futures Group.
Strong export demand for U.S. rice has boosted prices this fall as several major rice-producing countries have stopped exporting as poor weather this year has trimmed production.
A poor crop in Vietnam earlier this year and the recent decision by India to ban non-basmati rice exports has removed the second-and third- largest rice exporters from world markets, leaving the U.S. and Thailand as the world's major rice suppliers.
"Rice prices need to go higher to ration demand and that hasn't happened yet," said Ed Taylor, an analyst at Firstgrain.com.
Seasonally, rice tends to trade sideways to lower in December with participants moving to the sidelines ahead of the holidays. In addition, the harvest of a new crop in Asia during the December and January timeframe adds to the seasonal weakness.
The normal seasonal decline hasn't occurred as the demand for U.S. rice has limited its impact, said Taylor.
Thursday, the U.S. Department of Agriculture reported total rice weekly export sales commitments were 2 million metric tons in the 2007-2008 marketing year, 59 percent of what the USDA forecast for the entire year, which ends next summer.
The loss of production, plus an increase in world consumption, has resulted in the tightest world stocks since 1983 and 1984, according to the USDA.
Strong demand for corn, wheat and soybeans will keep rice firm, as rice prices need to be high enough to encourage rice acreage this spring, analysts said.
"It's more than just what's happening with rice demand, it's the competition for acreage with the other crops in the U.S.," said Bill Nelson, associate vice president of AG Edwards & Sons in St. Louis. Rice plantings have declined significantly from the level seen two years ago while demand has increased. The U.S. cannot afford to continue to lose rice acreage, said Nelson.
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Joe Poncer is a correspondent of Dow Jones Newswires.
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