Embed Size (px)
Citation preview
FIRSTGRAIN
PEAK RICE:
WEAKNESSESTHREATSSTRENGTHSOPPORTUNITIES
S W
TO
Simplifying the market
Strengths
•Reduced rice plantings•Lower rice Yields•China Protocol•Improving M.E. markets•El Nino Drought•Futures bottoming out
Opportunities
•Lower Asian rice production•Lower South American production•Lower Central American production•Farmers around the world infuriated by current low prices
Threats (NOT MANY)
•World largest importer devaluing currency•El Nino not as severe as media claims?•Thailand has greater stocks than most expect?
Weaknesses
•Strong Dollar—Fed raising interest rates•Volatility in a bearish zone•Cash market weak thus far•Futures liquidity•Still no significant change in CBOT contracts
S W
TO
Primary factorsSWOT ANALYSIS
W TWeaknesses•Current long grain prices not profitable.
WORLD RICE PRICES: NO
PROFIT
US ACRES INCREASE IN
2016?
Threats•US rice demand still threatened by Asian And South American rice
US DEMAND OFF AND US IMPORTS UP
Negative factorsSWOT ANALYSIS
S OStrengths
•World rice supply lowest in 4 years •Stocks lowest in 25 years
THAILAND/INDIA STOCKS TO
PLUNGE
Opportunities
•Asian countries are expected to increase imports in 2016
PEAK RICE IN ASIA: REGIONAL
EXPORT SURPLUS FALLING
Positive factorsSWOT ANALYSIS
Weaknesses
Current weaknesses
•US acreage sliding lower but could come back strong in 2016•US rice program better deal than other grains. •US domestic demand DOWN but US IMPORTS UP STRONG
SWOT ANALYSIS
Weaknesses II
OPPORTUNITY:
•Corn area and yield rising rapidly•Rice area flat and yields moving sideways. •Outcome: bearish for Asian corn but bullish for Asian rice.
SWOT ANALYSIS
Weaknesses II
Current weaknesses: Asian (India & China = “Chindia”) corn stocks rising
•Low corn prices for US in 2016? •Corn acres go into rice in US? Potential of one million acre increase in US rice acreage.•Thai and US prices may move closer together in 2016
SWOT ANALYSIS
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
0
50,000
100,000
150,000
200,000
250,000
300,000
CHINDIA CORN PRODUCTION (LEFT) AND STOCKS (RIGHT) IN OOO MTSCHINDIA PRODUCTION CHINDIA STOCKSLinear (CHINDIA PRODUCTION) Poly. (CHINDIA STOCKS)
LOOK OUT! For these Threats
THREAT •Latin American demand up, good news•US export share plunging, bad news•Causes: South American rice, quality and price problems for US rice
SWOT ANALYSIS
THREAT: DEMAND THREAT FROM WHEAT IN ASIA
•Food grain demand strong in Asia, good news.•Rice share rising until 2008, good news.•Wheat gaining share of the food grain demand growth in Asia since 2008, bad news.
SWOT ANALYSISLOOK OUT! For these Threats
Current strengths: How can Thai prices remain weak in 2016?
•Thai production declines due to drought.•Thai rice stocks back to normal.•Thaiiland wants rice prices to rise and recoup their losess.
StrengthsSWOT ANALYSIS
Opportunities for Market Improvement
Current opportunities: How can Asian rice prices remain low in 2016?
•Asian rice stocks will plunge to the lowest level in the last 25 years.•Yet net exports from the region will hold about steady? Really? Can that be true?•This assumes no export ban by India, the Thai stocks are real and no more El Nino impact.
SWOT ANALYSIS
Opportunities for Market Improvement from China rice import demand
Current opportunities
•China bean import demand rose slowly from 1995 to 2001, +13% per year for first five years then up 185% per year!•China rice import demand 2011 to 2015 rising “slowly”, +12% per year for first five years, then what?•Can rice imports imitate bean imports and mushroom in 2016‐2025?
SWOT ANALYSIS
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
1980/1981 1985/1986 1990/1991 1995/1996 2000/2001 2005/2006 2010/2011 2015/2016
China Net imports Beans (left axis) and Rice (right axis) (in 000MTS)
Net Soybean IMports
Net Rice Imports
Strengths
•Production in key medium grain countries declines in 2015/16•Long prices should rally, raising the medium grain price ceiling•Prolonged drought in California, Australia and Egypt
Opportunities
•South Korea production falls 6%•Australia production falls 10%•China protocol to be signed by Ministries of Ag soon•Australia’s exports to Japan, Taiwan, and Jordan down sharply
Threats
•Increased US acreage by way of Jupiter•More strength in the USD ahead•Russia exports more to Turkey•Thailand seeking to enter Japonica export industry
Weaknesses
•Devaluing Chinese yuan•USD up 12% from this time last year (ICE index)•Turkey production up 8.6%•Taiwan production up 6%•Large carry in
S W
TO
SWOT SUMMARYMEDIUM GRAIN
SummaryKey factors
•Large carryin weighing heavy on new crop •Tenders began at $825 FOB and have decllined consecutively to $780 FOB•Current exports price result in paddy market illiquidity •Taiwan weaker prospect for Jupiter on their increased production
SWOT ANALYSIS
Expect lower after recent tenders
Overall tightening in world medium grain supplies should keep prices firm.
Long grain price will rally will mitigate substitution, lending support to higher prices later in the year.
Avg market prices may reflect 2014/15
Summary
SWOT summary
•Weak rice prices.•Weak US domestic demand, imports rising. •Threat of South American sales to US markets.•Strength from Asia as stocks slide.•Strength as Asian rice production stagnates.•Opportunity with tight Asian rice stocks to rally Asian rice price in 2016.•Opportunity for US if production slips in Latin America•Opportunity: China a growing import demand base of unknown potential, longer term.
SWOT ANALYSIS
