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Rice Is Next

Tyler Durden's picture




 

The one commodity which has so far sneaked quietly between the cracks of rampant limit up opens and overnight price surges, just happens to be the most important one: rice. If the price of rice were to follow the same fate as wheat, not to mention chocolate, and if the world starts getting visuals of what is happening in Egypt transposed a few thousand miles east, smack in the middle of Guangdong province, then not even the Sack Frost dynamic futures lifting duo will be able to do much to instill confidence that the revolution is progressing "better than analyst estimates." And it appears that the seeds of rice's price surge may already have been planted. Bloomberg reports that "U.S. farmers are planting the fewest acres with rice since 1989 just as global demand surpasses production for the first time in four years, driving prices as much as 12 percent higher by December. Plantings in the U.S., the third-biggest shipper, may drop 25 percent this year because growers can earn more from corn and soybeans, according to the median in a Bloomberg survey of nine analysts and farmers. Rice, the staple food for half the world, declined 4 percent last year, extending a 2.9 percent drop in 2009. The other crops jumped 34 percent or more." Zero Hedge predicted in October of last year that the next real bubble will be rice. We stand by this prediction, which has so far not been validated presumably due to some quite interesting behind the scenes PM-for-food arrangement between China and one of the very popular US TBTFs. As the chart below shows,  rice is poised for an imminent break out.

From Business Week:

“Why would you want to take that risk to plant rice, knowing that your income is going to be way down?” said Terry Hatley, a farmer in Marked Tree, Arkansas, who may not plant any rice this year after growing the crop for more than three decades. “Farming is a business, and you’ve got to look at the economics of it. Now, the economics on rice are very dim.”

Bangladesh, South Asia’s biggest buyer, doubled a target for imports in 2011 to curb prices, the Directorate General of Food said last week. The Philippines, the world’s largest importer, will probably start buying next month, according to the National Food Authority. While global stockpiles are predicted to be 26 percent higher this year than in 2007, consumption will gain 3.4 percent and harvests 2.6 percent, the U.S. Department of Agriculture estimates.

The Thailand export price, the benchmark in Asia, may climb as high as $600 a metric ton by December from $534 on Jan. 26, a gain of 12 percent, according to the median estimate in a Bloomberg survey of eight traders, exporters and analysts.

The rice price is currently in the clam before the storm:

“The acreage war has begun,” said Dennis Delaughter, the owner of Progressive Farm Marketing Inc. in Edna, Texas, who expects futures traded on the Chicago Board of Trade to advance as much as 20 percent to a three-year high of $18 per 100 pounds by November. “Of all the futures markets in the agricultural sector, rice is the sleeper,” said Delaughter, who correctly predicted an 11 percent gain in prices last March.

Rice represents almost 50 percent of the food expenses of the poorest across the developing world, and 20 percent of total household spending, according to the International Rice Research Institute, based in Los Banos, the Philippines. In the U.S., 6 percent of incomes are spent on groceries, data from Euromonitor International show.

While the United Nations says global food prices climbed to a record in December, grain stockpiles have been replenished since 2007-2009, when the U.S. State Department estimates there were more than 60 food riots around the world.

And as rice imports have no choice but to surge, speculators will sooner or later overrun the same synthetic paper short that has kept spec non-commercials out of the rice market.

Bangladesh doubled its rice import target to cool prices that surged to a record in December as consumers and farmers hoarded supplies, said Badrul Hasan, director for procurement at the Directorate General of Food in Dhaka. The goal was raised to 1.2 million tons for the year to June 30 from 600,000 tons.

The Philippines may import as early as next month, although probably less than last year, Lito Banayo, the head of the National Food Authority, told reporters on Jan. 11.

“The trigger will be pulled when the Philippines’ orders start coming in,” said Mamadou Ciss, the chief executive officer of Singapore-based rice brokers Hermes Investments Pte, who correctly predicted in 2006 that prices would double. Thai
100 percent grade-B rice may jump 22 percent to $650, he said.

Production in Thailand, the world’s biggest exporter, will increase 0.4 percent to 20.35 million tons this year, according to USDA estimates. In Vietnam, the second-largest shipper, output will be little changed at 24.98 million, the data show.

Vietnam will export about 6 million tons this year, compared with 6.75 million tons in 2010, Deputy Agriculture Minister Diep Kinh Tan said in an interview Jan. 4.

Bottom line: it is only a matter of time before those rice futures pay off handsomely. As for the imminent food riots where they actually do matter - no problem. Just tell the Chinese to eat iPads and Eminis.

“There are so many reasons for prices to move up,” Dwight Roberts, president of the Houston-based U.S. Rice Producers Association, said by phone. “We sure are poised for a strong and upward movement in the market.”

Just like gold and silver are the last bastion for JP Morgan, so rice is the Rubicon for the Fed's monetary policy. We urge everyone to keep a very close eye there...

 

 

 

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Mon, 01/31/2011 - 08:57 | 919750 papaswamp
papaswamp's picture

If rice gets out of control...riots all over those hot emerging markets. An unstable Chinese govt?...STRATFOR's 10 yr prediction of China downfall would be realized.

Mon, 01/31/2011 - 09:27 | 919826 Dagny Taggart
Dagny Taggart's picture

Do you know if STRATFOR's Friedman covers this in The Next Decade?

Mon, 01/31/2011 - 10:03 | 919919 66Sexy
66Sexy's picture

so whats a good etf for playing rice?

Mon, 01/31/2011 - 10:18 | 919967 Dingleberry Jones
Dingleberry Jones's picture

Exactry. I second this.

Mon, 01/31/2011 - 11:55 | 920398 Hephasteus
Hephasteus's picture

Here's a good etp (Exchange Traded Poison) to NOT play this.

p { margin-bottom: 0.08in; }

The Scorpion's Sting -Lesath - upsilon Scorpius - A blue/white (B2 spectrum) third magnitude star. Shaula - lambda Scorpius - A blue/white (B2 spectrum) triple variable star, second order of magnitude.

Mon, 01/31/2011 - 10:51 | 920101 PY-129-20
PY-129-20's picture

The Friedman "dude" was pessimistic about China in the Next Decade. You might have seen the Stratfor-Video on Youtube. I can't remember everything now and cannot access my excerpts. But let me say this - he also made some quite ridiculous predictions in his book. Strong Poland? Strong Mexico? I don't see that coming. He was very pessimistic about the emerging markets and Russia. I don't share his opinion on Russia. Poland will get stronger, but not that strong. Turkey - I don't know. As it seems they have also a large housing bubble going.

I am also more pessimistic about the outlook on the USA (but then again; I am pessimistic about nearly everything). As a German I would be happy if he was right. To be honest, I don't want a strong China. I want a strong USA. Having said that, a crashing China would hurt our econonmy very bad.

I would recommend you to read Krepinevichs "7 deadly Scenarios". Especially his scenario about Pakistan is quite frightening.

Mon, 01/31/2011 - 09:05 | 919751 Turd Ferguson
Turd Ferguson's picture

Didn't Jimmy Rogers also peg rice as the big idea for 2011?

Maybe this is the answer?

http://www.youtube.com/watch?v=ToJry8diwTs

Mon, 01/31/2011 - 09:19 | 919802 French Frog
French Frog's picture

up 2.8% already today

Mon, 01/31/2011 - 11:50 | 920377 bruinjoe93
bruinjoe93's picture

Jim's investment plays for 2011 are rice and silver. I bet Jim is buying silver right now.

 

http://www.youtube.com/watch?v=IGlGz2IKnBM&playnext=1&list=PLDD58388F2DB...

Mon, 01/31/2011 - 09:00 | 919757 MiningJunkie
MiningJunkie's picture

Just buy ANYTHING denominated in FRN's because before the Barnank is through, the FED balance sheet will look paltry against the ocean of newly-printed currency. Reflate or die.

And just buy the fucking dip...

Mon, 01/31/2011 - 09:04 | 919766 Leo Kolivakis
Leo Kolivakis's picture

Ask yourselves who benefits from this ''creative destruction''?

Mon, 01/31/2011 - 09:08 | 919773 Hephasteus
Hephasteus's picture

Leo's glad to see you asking the right questions.

Mon, 01/31/2011 - 09:08 | 919775 Orly
Orly's picture

Seems to me that the usual suspects are sweating bullets and calling out the big guns.  Guess we'll see about 1030 this morning...

Mon, 01/31/2011 - 09:05 | 919767 ColonelCooper
ColonelCooper's picture

Bio Fuels Bitchez!!

 

Mon, 01/31/2011 - 09:07 | 919772 cossack55
cossack55's picture

"Let them eat rice cake" Bitchez.

Mon, 01/31/2011 - 12:55 | 920704 Mariposa de Oro
Mariposa de Oro's picture

Let them eat Hope-N-Change!

(I sure hope we can eat it)

:-(

Mon, 01/31/2011 - 09:41 | 919864 savagegoose
savagegoose's picture

+1

 

Mon, 01/31/2011 - 09:06 | 919769 Sutton
Sutton's picture

Like the man at the resturant says, "Flied Lice".

Mon, 01/31/2011 - 09:11 | 919770 whatz that smell
whatz that smell's picture

very bullish technical pattern:

1) bullish impulse- july to nov.

2) followed by a bullish contracting triangle- nov. to mid jan.

3) upward thrust during a bullish time frame.

break-out imminent... yummy!

Mon, 01/31/2011 - 09:14 | 919789 Snidley Whipsnae
Snidley Whipsnae's picture

Indonesian population ~ 238 million souls according to Wiki.

Egyptian pop ~ 80 million

They will not starve quietly while Ben exports inflation to their shores.

Cornholeathol = starvation for many

Mon, 01/31/2011 - 09:15 | 919790 stoneman sacked
stoneman sacked's picture

Financial Genocide.

Mon, 01/31/2011 - 09:15 | 919791 Tense INDIAN
Tense INDIAN's picture

trouble surely for India......Now i need to stock up those Basmati rice Big packs which are on discount offer....

Mon, 01/31/2011 - 09:19 | 919803 Seasmoke
Seasmoke's picture

rice will be boiling very soon

Mon, 01/31/2011 - 12:07 | 920458 Orly
Orly's picture

It doesn't matter.  The laws of physics cease to exist on Bernanke's stove.

/:

Mon, 01/31/2011 - 09:25 | 919822 Oh regional Indian
Oh regional Indian's picture

When the meat-train goes ape-shit in the west (it is bound to, out of control industry), and their own internal grain needs skyrocket, that will the tipping point for food.

Rice has been one of the craziest gainers (in price terms) in India in the past 2 years. On a tear at the retail level. And Indian government stock godowns are full of mostly rotten food-stock. Imagine when India's billion see un-affordability... Sad because it is engineered. All good because it is cyclical, our self-fulfilled wipe-out that is.

ORI

http://aadivaahan.wordpress.com/2010/11/18/enchanted-mesmerized-en-chained/

Mon, 01/31/2011 - 09:33 | 919844 ak_khanna
ak_khanna's picture

The only thing driving up commodity prices worldwide are speculators armed with cheap money provided by central bankers and super fast computers. This is causing a havoc in the lives of rest of the population and pushing them towards poverty as they can no longer afford the basic necessities of life.

Regulators are either hand in glove with the banksters or are too slow to react and take ages to identify and take measures to solve the problems.

Total ban on speculation and the reinforcement of Glass Steagall Act is strictly required to bring relief to the man on the street.

http://www.marketoracle.co.uk/Article24581.html

Mon, 01/31/2011 - 09:34 | 919846 Sudden Debt
Sudden Debt's picture

DON'T EAT RICE!!!! IT TURNS YOU SKIN YELLOW AND YOU'LL BE SO CONSTIPATED THAT YOU WON'T BE ABLE TO OPEN YOUR EYES ANYMORE!!

Mon, 01/31/2011 - 13:37 | 920880 Clycntct
Clycntct's picture

Tough crowd in here this AM.

Should have added Ha Ha junk me.

Mon, 01/31/2011 - 09:46 | 919886 Life of Illusion
Life of Illusion's picture

Monsanto will push GMO rice to non user countries.

Mon, 01/31/2011 - 09:48 | 919892 herman55
herman55's picture

I copied and pasted the following post at least 200 times in the last 3 weeks. Pay attention to the language on Egypt. Nothing will trigger social upheaval like food price increases in the 3rd world.

 

There is no, repeat no, food shortage on the planet today. Sort of… Using the United Nations suggested daily calorie intake there is more than sufficient foodstuffs produced annually, globally. Period. Now then, the question is how you use them....for example, if you wanted to bring the daily calorie level in both China and India up to the U.N. level it would take an additional, not total but additional, 31 million tons of foodstuffs. To put that in perspective the U. S. ethanol fraud consumed 165 million tons of corn during 2010. China has 2.3 trillion dollars in Treasuries but chooses not to expend it on foodstuffs for its own population. India was a net exporter of wheat in 2010.....I had the opportunity to have dinner with the Chairman of one of the largest commodity/food processors in the world over the holidays....there is no food shortage...and the American ethanol scam has absolutely destroyed relationships with food importers from the U.S. , like Egypt for example, that took decades to develop....and now for some Physics: if ethanol were in fact a "sum positive" they would use ethanol as the energy source to produce (boil/distill) more ethanol/corn mash.....and they, the ethanol producers, don't......because it consumes more energy to make a gallon than you get out of it (referred to as the “thermal load factor”)....It’s nothing like an oil refinery that uses part of the barrel of crude oil to power the refinery.

Just think- 40% of the American corn crop now goes for the 10% gasoline EPA mandated blend rate yet the EPA is pushing to raise the blend rate to 15%--or 60% of Americas corn crop. As an aside 80% of the canola crop, a premium cooking oil, is used for bio-fuels in  Germany. Double the price of corn and bull doze another million acres of Amazon jungle to plant; triple the price of tortillas and watch the Mexicans pour north across the border. Noted: Chuck Grasley, the erstwhile Republican Senator, is the mouthpiece for the ethanol scam. He farms 4,120 acres of Iowa corn ground. My source tells me that without the ethanol scam (and it was renewed for only 1 year…) the price of wheat goes to 4$ and corn to $3.35.

.

Mon, 01/31/2011 - 11:38 | 920312 StychoKiller
StychoKiller's picture

Like EVERY market distortion I've ever heard about, this one too can be blamed on Govt interference in the market(s)!

Mon, 01/31/2011 - 12:19 | 920520 NorthenSoul
NorthenSoul's picture

Let's try this:

EVERY market distortion one shall ever hear about, can be blamed on either Govt interference in the market(s), or the existence of a monopoly/Cartel, be it private or public.

This way, we cover all known cases, and avoid the rank political propaganda.

Mon, 01/31/2011 - 12:46 | 920661 weinerdog43
weinerdog43's picture

Much better.

Mon, 01/31/2011 - 21:14 | 920538 Flyingtrader
Flyingtrader's picture

You Sir, have spoken truth. 

Unfortunately the spectre of (hyper)inflation (as implied by price of gold, according to some) will keep people on this board from doing any critical thinking on the supply/demand front.

Mon, 01/31/2011 - 10:00 | 919912 Matt
Matt's picture

If inflation via devaluation of the USD is the/a major cause of dramatic food price increases, it seems to me the emerging markets have two options to avoid food riots:

option a) de-peg their currency from the USD / stop manipulating their currency lower, so the price in their own currencies doesn't climb as dramatically

or

option b) go back to buying US treasuries, to try to push USD higher to reduce the increase in the price of food in USD.

Mon, 01/31/2011 - 10:13 | 919948 topcallingtroll
topcallingtroll's picture

I live in a big rice producing state. Nobody eats it here because that is third world commie food. Gentlemen prefer wheat. A rise in rice prices would be ok for us. Put the screws to china and make them depeg.

Mon, 01/31/2011 - 12:19 | 920526 hardcleareye
hardcleareye's picture

TCT, your insight into what "gentlemen" prefer and mine are somewhat what odds..... 

That being said, while I concur it might provide some encouragement for China to depeg, it would also result in much global collateral damage and volitility... this may not be in the best interest of the US.

Mon, 01/31/2011 - 13:16 | 920796 VisualCSharp
VisualCSharp's picture

Gee, I never knew that rice vs. wheat was a social class decision. /sarc

Your sweeping generalization has been duly noted... and ignored.

Mon, 01/31/2011 - 10:15 | 919956 topcallingtroll
topcallingtroll's picture

Wow! China is buying rice and gold swaptions? New goldman market?

Mon, 01/31/2011 - 10:39 | 920039 cbtrice
cbtrice's picture

There are no etf's in rice because inspite of it being the largest crop in the world it is one of the smallest traded commodities. The only transparent (if you can call it that) is the CME Rough Rice contract.  mpw

Mon, 01/31/2011 - 11:32 | 920282 Flyingtrader
Flyingtrader's picture

Where is the lack of transparency in the CME rice contract?  What is your basis for this suggestion?  Have you ever traded it?

 

Mon, 01/31/2011 - 11:55 | 920403 bruinjoe93
bruinjoe93's picture

The CME is corrupt.  If they let JP Morgan and the bullion banks manipulate silver what is stopping them from manipulating other markets?

Mon, 01/31/2011 - 13:07 | 920484 Flyingtrader
Flyingtrader's picture

You'll have to do better than hearsay.  Silver is a legacy COMEX product that was inherited from the merger.  If the problem of silver manipulation is as endemic as most everyone here believes then you must see that the problems lay in the COMEX contract long before it was a CME product.  In the case of rice (another legacy contract, this time from the CBOT), it is and has been a very well understood and actively traded contract.  I have traded it on many occasions and have even taken delivery several times.  I have never witnessed this " lack of transparency" intimated by cbtrice. 

Furthermore,  to what end would this be manipulated?  How? If you find yourself having to do mental gymnastics to accomdate a conspiracy theory that in turn justifies your feelings of angry impotence towards your place in the food chain, maybe there isn't a conspiracy?

Mon, 01/31/2011 - 12:21 | 920535 cbtrice
cbtrice's picture

for the last 20 years (hint look at the name). there is some mickey mouse with the open interest now and again as some firms hide their presence and size and the cftc cot doesn't always reflect the right designation.  

Mon, 01/31/2011 - 20:42 | 920749 Flyingtrader
Flyingtrader's picture

So what?  This has always been true of almost every contract on the floor.  Sneak houses have been an institution at exchanges for as long as there have been exchanges.  It surprises me to learn how many traders really care about the COT report.  Perhaps it is just my thinking, but what ADM and Riceland do with their money doesn't really impact the true S/D.  Most everyone I know keeps balance sheets, tracks weather and follow the export sales #'s.  Stocks in deliverable positions are published freely by the exchange and the spread trade is a great guide to the mechanics of storage capacity and the demand thereof.

 

Though you did not imply anything beyond a lack of transparency, others here are quick to scream fraud and manipulation and it is getting tiresome.  Not everything is a conspiracy and not all speculators are crooks.   It may not have been your intention but I submit to you that unqualified implications of a "lack of transparency" does nothing but arm the ignorant with more bad information.

Mon, 01/31/2011 - 10:45 | 920066 tradewithdave
tradewithdave's picture

Mauritania!  Come on down!... you're the next contestant on The Price Is Rice!!

I didn't realize until today that Tyler Durden is actually Drew Carey.  You can always tell the smart ones by their glasses.

http://tradewithdave.com/?p=4933

Dave Harrison

tradewithdave.com

Mon, 01/31/2011 - 10:46 | 920068 thefatasswilly
thefatasswilly's picture

rice, lol. this will be good.

Mon, 01/31/2011 - 11:10 | 920170 texas goldfinger
texas goldfinger's picture

The market looks set for a big gap up this morning, something close to the first limit.

Mon, 01/31/2011 - 11:11 | 920175 LehmanRefugee
LehmanRefugee's picture

I agree with the overall call but I think you might be early on the timing here. The US is expected to have a a bumper yield this year despite lower acerage "up almost 11 percent from a year earlier and the highest on record" (report below). This largely made up for the declines elsewhere in the world. But the point remains, any small disruption to supply will have an outsized impact. 

 

http://usda.mannlib.cornell.edu/usda/current/RCS/RCS-01-13-2011.pdf

Mon, 01/31/2011 - 11:21 | 920235 Stuck on Zero
Stuck on Zero's picture

Everyone ignores the potato.  The potato fills the stomachs of more people than rice or wheat or corn.  It usually is grown and consumed locally so it isn't listed as a major export item.  The world could live without a grain crop or two but it couldn't live without potatos.

Mon, 01/31/2011 - 12:26 | 920556 cbtrice
cbtrice's picture

Nope, the spud isn't even close. Rice feeds billions as a staple in Africa and Asia, often as the major starch. The world couldn't live without a rice crop it would turn India, China and several other countries inside out.

Mon, 01/31/2011 - 12:54 | 920697 Stuck on Zero
Stuck on Zero's picture

World production figures:

Rice: (about) 400 million metric tons
http://www.rice-trade.com/world-wide-ric…

Potatoes: 315 million metric tons.

Potatoes are the fastest increasing food crop.  Yields are higher per acre.

Mon, 01/31/2011 - 13:54 | 920926 Clycntct
Clycntct's picture

I've got some potatoes in the corner growing green shoots.

This is good? Been there for 3 weeks.

I've got a 6 quart jar of rice, been there for 8 months.

No green shoots. Bummer.

Mon, 01/31/2011 - 12:12 | 920481 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Sorry, I don't rearry rike rice....

Rennon Hendrix... I hate that guy!

Mon, 01/31/2011 - 16:18 | 921434 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

Just thought I'd let you folks know I had a Michael Douglas moment today, I bought 2 Big Macs this morning and nearly choked on them.£4.98 that's $3.98 each at today's rate.

I can't be certain,but I'm pretty sure the last time I bought a BMac,just before Xmas it was £2.29(it had just jumped from about £2.20 a couple of months previous),so I reckon Le Big Mac has gone up from £2.20 to £2.49 in about six months an increase of some 13%.

Mon, 01/31/2011 - 19:16 | 922140 naughtius maximus
naughtius maximus's picture

Do not hold grain waiting for higher prices while the people are hungry!!!

Do NOT follow this link or you will be banned from the site!