Volume 18, Issue 31

August 13, 2021

The Iraq business has been dominating the news recently, as there have been multiple rumors and confirmed purchases over the past six weeks. Below is a review of what’s been tallied up at this point, as there has been a substantial amount of rice purchased from the U.S., Uruguay, and most recently Thailand. See table below:

The USDA published the WASDE report this week, and the focus is on lower supplies on account of a shorter crop, lower domestic use, and higher exports—thank you Iraq. Beginning stocks are a bit lower based on higher exports and fewer imports in 2020/21. Production is down by over 2 million cwt, and yields are pegged at 7,544 pounds per acre, down from 7,600 in the previous forecast. Because of the container shortage and high freight rates plaguing the global supply chain, rice imports were lowered by 1 million cwt, down to 38 million cwt. The Iraq business bumped the long-grain exports by 2 million cwt, up to 65 million cwt, but the drought in California partially offset the expected medium-grain exports, lowered by 1 million cwt down to 26 million cwt. On a global outlook, the expectation is for increased supplies, slightly higher consumption, broader trade, and increased ending stocks. India’s consecutive bumper harvests and the record-low pricing from major exporters like Vietnam and Thailand are contributing to higher trade and higher stocks.

The weekly Exports/Sales report offered an increase of nearly 700% for sales on account of the Iraqi business, though only 4,600 mt of exports this week, a decrease of 89%. This is no surprise.

In Asia, the market remains sideways to down, with Thai, Viet, and Indian pricing all softening a bit more this week. COVID-19 and container shortages are limiting India’s ability to load and ship rice, hence the price holding steady there. It’s a similar story in Vietnam, where COVID-19 shutdowns are making it difficult to load containers—when they’re even available. All prices for Thai, Viet, and Indian rice are converging in the $380-385 MT range this week. 

On the ground, harvest in Texas is approaching the halfway point, while Louisiana is now at least 35% harvested. Optimism for yields persists in Arkansas where harvest hasn’t begun yet, and will perhaps make up for the sub-par yields reported thus far in Louisiana and Texas. While new crop is exciting to discuss, the “hangover” of old-crop supplies weighs heavy on the market—especially when Covid-19 has kept domestic buying at a minimum on account of school lunch programs being restricted. Like Arkansas, Mississippi won’t begin harvest until the end of August, but the expectations are a bit more average when compared to the optimistic tone coming out of Arkansas. 

Futures action remained relatively muted, with open interest only .4% down at 7,679. Average daily volume was at 492, 32% below last week. Futures would indicate optimism that the required Letter of Credit will actualize the balance of the 40,000 mt of Iraqi business yet to be confirmed, but holding cautious before breaking out with the absolute confirmation.

On Monday, August 9^th, the Senate amended and passed HR 3684, the Infrastructure Investment and Jobs Act (IIJA) by a vote of 69-30. The HR 3684, as amended, provides $1.2 trillion infrastructure funding ($548B in new spending) to rebuild roads and bridges, modernize public works systems and boost broadband internet, and other infrastructure improvements. Provisions include--

The passage of HR 3684 was the culmination of months of bi-partisan negotiations between 20 Republican and Democratic Senators. The Senate version differs dramatically from the underlying House passed bill which was approved by a mostly party line vote of 221-201 (2 Republicans voted aye). A major concern of the bi-partisan negotiated bill was the “pay-fors” to offset the spending in the IIJA. The IIJA pay-fors include:

Overall CBO estimated the bill will add $256B in projected deficits over eight years. Future House action on the bill became much brighter after Senate passage as House Transportation Chairman DeFazio dropped his opposition of the Senate infrastructure bill and said he will push for additional climate and infrastructure policy in reconciliation bill.

On Tuesday, August 10^th, the Senate passed its $3.5 trillion FY22 Budget Resolution by a party line vote of 50-49. The concurrent budget resolution provides Congress fast-track procedures to pass a second “human” infrastructure package of up to $3.5 trillion with a simple majority vote in the Senate. This second infrastructure package, based on President Biden’s American Families Plan (aka Build Back Better agenda), which was released in April would make investments in health care, education, and childcare. 

47 amendments were considered, of which 29 were adopted. The budget resolution provides $3.5 trillion in long-term investments offset by a combination of new tax revenues, health care savings, and long-term economic growth. The funding investments include:

The Budget Resolution includes pay-fors such as follows:

Approval of the budget resolution is the first step to using the reconciliation process which allows the Senate to pass the $3.5T bill by a simple majority (50 votes) as opposed to the 60 votes needed to avoid the filibuster. Senate Majority Leader Schumer released reconciliation instructions with a target date of 15 September for Senate committees to submit their reconciliation legislation according to their specific policy areas. The Senate Agriculture Committee was provided $135 B in new spending to be spent as follows:

Reconciliation Instructions for other Committees are as follows:

The budget resolution includes reconciliation instructions allowing for changes to mandatory spending and revenues that increase the deficit by up to $1.75 trillion over ten years. The supporting documents for the budget calls for $3.5 trillion in new spending, which includes a reconciliation instruction to the Senate Finance/Ways & Means Committees for deficit reduction of at least $1B. Democrats have stated they want reconciliation fully paid for. That will require identifying additional revenues. Passing a reconciliation bill in the Senate will require support from all 50 senators who caucus with Democrats. Senator Manchin (D-WV) has raised concerns about the price tag of the budget plan and stated he voted ‘YES’ on the procedural vote to move forward on the budget reconciliation but has serious concerns about the grave consequences if Congress decides to spend another $3.5 trillion. The House will return on 23 Aug to vote on the budget resolution.

 

Another looming crisis is a vote on raising the debt limit. The two-year federal debt ceiling suspension ended on 31st July. The Treasury Department has begun using extraordinary measures to avoid a default until October or November before the government runs out of money. However, according to Secretary Yellen, there are “scenarios in which cash and extraordinary measures could be exhausted soon after Congress returns from recess” on 20 September when the House returns (Senate returns one week earlier). On 9 Aug, Treasury Secretary Janet Yellen called on Congress to increase or suspend the debt limit on a bipartisan basis stating it was a shared responsibility to protect the credit of the U.S. Senate Minority Leader McConnell said last week that Republicans won’t support a debt limit increase or suspension. On 10th August, 46 Republican Senators signed a letter stating that no Republicans support a debt limit increase. Options to raise or extend the debt limit include passing a stand-alone bill or adding it to the Budget Resolution, Continuing Resolution, or Reconciliation bill.

Stay tuned.

CANCELLED: Missouri Rice Research & Merchandising Council Rice Field Day

University of Arkansas Rohwer Field Day: Rohwer Research Station, Rohwer, Arkansas

34th Annual Arkansas Agricultural Hall of Fame Induction Luncheon: Embassy Suites, Little Rock, Arkansas – event details and tickets

Fisher Delta Research Center Field Day:

The 84th International Rice Festival: The rice festival will return to Crowley, Louisiana, after being canceled last year due to the COVID-19 pandemic.