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  • What to Expect from India’s Removal of the Export Ban on White Non-Basmati Rice

    What to Expect from India’s Removal of the Export Ban on White Non-Basmati Rice

    On September 28, India lifted its export ban on non-basmati white rice and replaced it with a minimum export price (MEP) policy of $490/metric ton. On October 20, India announced the removal of the MEP policy on non-basmati white rice and the removal of export duties on other rice products (e.g., parboiled, husked, and paddy rice), effectively freeing rice exports. While this measure was expected anytime and the global rice market was already factoring in the change to some extent, the announcement is creating shockwaves throughout the global rice market.

    India implemented the export ban on July 20th, 2023 (see https://southernagtoday.org/2023/07/27/shaking-the-global-rice-market-india-bans-exports-of-white-non-basmati-rice/) amid fears of a short rice crop due to the projected dry Monsoon that never materialized. India harvested a record rice crop (137.8 million metric tons) in 2023/24, but the export ban remained in place. Fast-forwarding to the current year 2024/25, the weather has been beneficial, and India is projected to harvest a new record crop (estimated at 142 million metric tons in October according to USDA) and carry record-high stocks. In summary, India’s production performance has been outstanding, which undermined the rationale for keeping the export ban for so long. 

    Since late September when India started easing exports, Asian rice prices have been under downward pressure despite the strong import demand, primarily from Indonesia and the Philippines. For instance, the export price of Thai 5% rice dropped below $500/metric ton in mid-October for the first time since July 2023 (Creed Rice Market Report, 2024; USDA, 2024a), while that of Pakistani 5% rice dropped more drastically as Pakistan competes more directly with India in many African markets. The latest Creed Rice Market Report (November 6th) suggests India’s export price for non-basmati white 5% rice is around $465/metric ton.

    In contrast, rice prices in the Western hemisphere are still at a much higher level than those in Asia, and the downward pressure has not been felt so hard, at least not yet. For example, the average export price for Southern 4% long-grain rice average $779/metric ton in 2023/24 and has hovered around $800/metric ton since August. Export prices out of Mercosur have also fluctuated between $770-790/metric ton in the last few weeks. While Western hemisphere long-grain rice has historically enjoyed a price premium relative to Asian long-grain rice, we should expect an increasing downward price pressure in the coming weeks and months as India’s rice harvest and the Mercosur’s rice crop advances.

    The million-dollar question for the U.S. rice industry is how will prices adjust this coming year, and the answer is: it depends. First, it will depend on the (most likely) downward adjustment in Asian export prices, which in turn depends (among other things) on how much rice India exports. A quick analysis using the Arkansas Global Rice Model (AGRM) and assuming India exports according to USDA projections in October (21 million metric tons) bring prices to $450/metric ton. However, if India decides to liquidate some stocks as well further increasing exports, prices may drop even further. Second, it will depend on the level of market integration with Asia. While historically Asian rice has not been prominent in the Western hemisphere, its presence is growing. The more market integration, the more pressure we should expect to receive, and an increasing price gap between Asian and Western Hemisphere rice could fuel market integration. Third, it will depend on the rice crop in Mercosur (South American countries that compete with U.S. long grain rice). USDA projects a slight increase in planted area relative to last year, which could result in more competition in core U.S. export markets.

    Finally, it is important to discuss how much room there is for price adjustments and profitability. The November WASDE report (USDA, 2024b) maintains long-grain farm prices unchanged at $14.50/hundredweight ($319/metric ton). Using that farm-price as a reference and the University of Arkansas Division of Agriculture 2025 Rice Enterprise Budgets (Figure 1), we estimate the average net returns to range from $22.25 to $103.28/acre for the different rice production systems, significantly lower than last year’s net returns, which ranged from $97.50 to $153.70/acre. We estimate the 2025 breakeven prices to range from $13.26 to $14.22/hundredweight (cwt) across production systems. The downward pressure on prices due to India’s liberalization of rice exports could push farm prices further down in the coming months, which could further decrease the economic returns and affect the 2025 rice planting intentions.                      

    Figure 1. Arkansas: Projected 2025 Net returns and Breakeven Price.

    References

    Creed Rice Market Report. 2024. Several issues. Available at https://www.riceonline.com/

    University of Arkansas Division of Agriculture. 2024. 2025 Arkansas Crop Enterprise Budgets. Available at https://www.uaex.uada.edu/farm-ranch/economics-marketing/farm-planning/budgets/crop-budgets.aspx

    USDA. 2024a. Rice Outlook. October 2024. Available at https://www.ers.usda.gov/publications/pub-details/?pubid=110218

    USDA. 2024b. WASDE Report. November 2024. Available at https://www.usda.gov/oce/commodity/wasde

    Durand-Morat, Alvaro. “What to Expect from India’s Removal of the Export Ban on White Non-Basmati Rice.” Southern Ag Today 4(46.4). November 14, 2024. Permalink

  • Changes to Supply and Demand Estimates in the November WASDE

    Changes to Supply and Demand Estimates in the November WASDE

    On November 8, the USDA released its monthly World Agricultural Supply and Demand Estimates (WASDE) report. Table 1 provides a summary of the November WASDE estimates for wheat, corn, soybean, and cotton.

    Table 1. Wheat, Corn, Soybean, and Cotton Supply, Use, Stocks, and Price Estimates, November 2024 WASDE

     WheatCornSoybeanCotton
     Production and Supply
    Planted (million acres)46.190.787.111.17
    Harvested (million acres)38.582.786.38.63
    Yield (bu/acre or lb/acre)51.2183.151.7789
    Production (millions of bushels or bales)1,97115,1434,46114.2
    Total Supply (millions of bushels or bales)2,78816,9284,81817.4
     US Exports and Use
    Exports (millions of bushels or bales)8252,3251,82511.3
    Total Use (millions of bushels or bales)1,97314,9904,34813.1
    Exports % of Total Use42%16%42%86%
     Stocks and Price
    U.S. Ending Stocks
    (millions of bushels or bales)    		8151,9384704.3
    Foreign Ending Stocks
    (millions of bushels or bales)    		8,64910,0354,37171.45
    U.S. Stocks/Use (%)41%13%11%33%
    U.S. Avg. Season Price ($/bu or $/lb)$5.60$4.10$10.80$0.66
    Data Source: USDA November WASDE

    Wheat

    Month-over-Month Changes

    Limited revisions were made to U.S. wheat supply and demand estimates. Imports increased 5 million bushels, and food use increased 2 million bushels, resulting in a 3 million bushel increase in U.S. projected ending stocks. Limited changes to foreign supply and demand resulted in a 9 million bushel decrease in foreign stocks.

    Year-over-Year Changes

    Compared to the last marketing year, U.S. production was up 276 million bushels and ending stocks were up 199 million bushels; however, foreign wheat stocks were down 438 million bushels, from 9.087 billion to 8.649 billion.

    Price Reaction and Outlook

    Prices for the report release day traded mostly flat, with price reaction limited to a 10-15 cents trading range. Overall, the report does not change the outlook for wheat prices.

    Corn

    Month-over-Month Changes

    The most substantial revision compared to the previous month was a decrease in the U.S. national average corn yield of 0.7 bu/acre, resulting in a 60-million-bushel decline in production. With use unchanged, ending stocks decreased 60 million bushels to 1.938 billion. Foreign stocks decreased 33 million bushels due primarily to increased corn use in Brazil, Mexico, and Southeast Asia. No production changes were noted in South America. 

    Year-over-Year Changes

    Year-over-year changes show a mixed supply and demand situation. U.S. corn production is estimated to be up 199 million bushels, with exports up 33 million. Net, the projected increase in U.S. ending stocks is 178 million bushels. Foreign stocks are projected to decline 575 million bushels compared to the previous marketing year.

    Price Reaction and Outlook

    Corn futures prices reacted positively to the report, with prices up a few cents for the day. Overall, the report can be viewed as neutral to slightly bullish for corn prices. The price outlook has not fundamentally changed; however, the report assists in stabilizing the downside of the market.

    Soybean

    Month-over-Month Changes

    The U.S. average soybean yield decreased 1.4 bu/acre to 51.7 bu/acre, resulting in a decline in production of 121 million bushels. Exports and crush were decreased 15 and 25 million bushels, respectively. Projected ending stocks decreased 80 million bushels to 470 million. Foreign projected ending stocks also decreased 26 million bushels. No changes were made to South American production estimates.

    Year-over-Year Changes

    Compared to the previous marketing year, U.S. soybean production is estimated up 371 million bushels, and total use is up 243 million bushels. U.S. and foreign ending stocks are estimated up 128 million bushels and 582 million bushels, respectively.

    Price Reaction and Outlook

    Futures prices reacted positively to the WASDE report, with prices up 3-5 cents for the day. Overall, the report was slightly bullish for soybean prices; however, price direction will be dictated by crop progress in South America.

    Cotton

    Month-over-Month Changes

    U.S. exports decreased 200,000 bales compared to October, resulting in a corresponding increase in U.S. ending stocks. Projected U.S. carryover into the next marketing year is 4.3 million bales. Foreign cotton stocks declined 780,000 bales due primarily to stock revisions in India and production decreases in Pakistan.

    Year-over-Year Changes

    Compared to the previous marketing year, U.S. production is up 630,000 bales, and exports are down 450,000 bales. Year-over-year ending stocks are projected to increase 1.15 million bales. Foreign stocks are projected to be unchanged compared to 2023/24.

    Price Reaction and Outlook

    Cotton prices showed limited movement for the day. Price ranges remained firmly intact, with nearby cotton futures trading 69-73 cents and deferred contracts at a 3-5 cents premium. Global demand remains the primary obstacle to improved cotton prices.

    References and Resources

    USDA World Agricultural Supply and Demand Estimates (WASDE). November 8, 2024. https://www.usda.gov/oce/commodity/wasde/wasde1124.pdf

    Smith, Aaron. “Changes to Supply and Demand Estimates in the November WASDE.” Southern Ag Today 4(46.3). November 13, 2024. Permalink

  • Feeder Cattle Futures Prices

    Feeder Cattle Futures Prices

    The January 2025 feeder cattle futures contract dropped roughly $25 per CWT from mid-July to mid-August. But, since early September, futures contract prices have rebounded about $15 per CWT. Points on the solid maroon line in the chart are the end of day futures contract prices from last Friday for each feeder cattle futures contract month. Points on the dotted black line are end of day prices back on September 6th, after the big decline.  

    The chart nicely illustrates seasonality within the futures market. Auction prices for 750-pound feeder cattle are typically lowest in the spring months when those calves are yearlings.  Futures prices reflect expectations of seasonal patterns too, but there are a few steps to thinking through the impact. 
     
    First, it’s important to remember that feeder cattle futures prices are the “market’s” expectation of what the CME Feeder Cattle Index will be at the end of the contract month. The “market” is made of buyers and sellers trading the futures contract. The feeder cattle index is calculated from auction prices for 700-899 pound steers collected by USDA-AMS for a 12-state region in the middle of the U.S. (there are no states east of the Mississippi River included in the index). It is a 7-day rolling weighted average, so today’s index value is a weighted average of the auction prices over the past week. Most auctions only operate one day per week so the 7-day average catches sales during a week’s period.
     
    How does seasonality fit into this? If prices are typically expected to be lower during certain months (i.e. seasonality), then the futures contract prices for those months will likely be lower because traders are “baking-in” the seasonality expectations. The chart above is a good example. Since these prices reflect 700-899 pound feeder steers, the market (futures traders) is expecting auction prices (the CME index) to be lower during the spring months before rising seasonally as summer approaches.

    This exercise illustrates the importance of understanding how the value of your cattle correlates to futures market prices for risk management or for forecasting prices. Your cattle may not be 800-pound steers sold in that 12-state region. But if you know your cattle are usually $10 above or $10 below the futures market at sales time, then then you can still use the futures market’s expectations to forecast the expected value of your cattle and to participate in price risk management tools.

    Maples, Josh. “Feeder Cattle Futures Prices.” Southern Ag Today 4(46.2). November 12, 2024. Permalink

  • Census of Agriculture Production Expenses for Southern States

    Census of Agriculture Production Expenses for Southern States

    The most recent agriculture Census defines total farm production expenses as “expenses provided by producers, partners, landlords (excluding property taxes), and production contractors for the farm business” (USDA/NASS, 2024). Based on Census data from 2017 to 2022, all southern states experienced higher overall production expenses (Table 1 in descending order based on change from 2017 to 2022). For 2017 to 2022, the top three states with the highest increases in production expenses were Louisiana (44.4% increase), Alabama (39.5%), and North Carolina (38.5%). The lowest were Oklahoma (15.35 increase), Texas (21.7%), and Virginia (21.6%). For the twenty-year timeframe 2002 to 2022, Alabama, Arkansas, and South Carolina had the largest production expense increases (yellow highlight), whereas Florida, Oklahoma, and Texas had the lowest (blue highlight).

    Total farm production expenses in the Census are comprised of the following categories 1) fertilizer, lime, and soil conditioners, 2) chemicals, 3) seed, plants, vines, & trees, 4) livestock & poultry, 5) feed, 6) gasoline, fuels, and oils, 7)utilities, 8) repairs, supplies, & maintenance costs, 9) hired farm labor, 10) contract labor, 11) custom work & custom hauling, 12) cash rent for land, buildings, & grazing fees, 13) rent & lease expenses for machinery, equipment, and farm share of vehicles, 14) interest expense, 15) property taxes, 16) medical supplies, veterinary, & custom services for livestock, and 17) all other production expenses (defined as storage and warehousing, marketing and ginning expenses, insurance, etc.).

    For these categories, the top five production expense categories summed across all 14 southern states were feeds purchased (28.9% of the total $112.3 billion); livestock and poultry purchased or leased (15.2%); hired farm labor (8.5%), fertilizer, lime, and soil conditioners purchased (6.6%); and repairs, supplies, and maintenance costs (5.8%). The five lowest were property taxes paid (2.2%); custom work and custom hauling (2.1%); contract labor (1.9%); medical supplies, veterinary, and custom services for livestock (1.2%); and rent and lease expenses for machinery, equipment, and farm share of vehicles (0.6%).

    Agriculture producers face many challenges. Combined with low commodity prices, the rising cost of production expenses highlighted here illustrate the financial squeeze to a farmer’s bottom line.  The resulting lean profits, diminished cashflows, and increased credit reliance threaten the financial viability of many Southern producers. That is why understanding your cost of production is imperative. Going into next year, identify your own high expense categories and manage appropriately. 

    Menard, R. Jamey. “Census of Agriculture Production Expenses for Southern States.” Southern Ag Today 4(46.1). November 11, 2024. Permalink

  • Making Effective Board Leaders in Your Cooperative

    Making Effective Board Leaders in Your Cooperative

    An effective board is a collection of “good leaders.” But how do we measure leadership and how do we create an effective board? Research shows that leaders are measured as “good” when they marshal all their skills, and abilities, and use their influence to affect and be affected by others (Northouse, 2016). Training new or existing individual board members and preparing them to serve others is the heart of producing good leaders. This can be accomplished by utilizing extension resources and participating in leadership development programs. 

    Leadership is crucial in creating the standard for boards of directors. Agricultural cooperatives (co-ops) boards are no different when it comes to sound governance. Addressing leadership incompetency early, at the same time increasing director capacity, is vital to the co-op’s long-term success. While producers are the backbone of co-op boards, their farming and ranching experience may not prepare them entirely for a role in professional oversight, strategic decision thinking, communication, and representation. In fact, our research revealed that directors struggle with self-awareness and communication, which are essential elements of good leadership, and instead focus greater attention on their fiduciary duties. 

    In a rapidly changing and uncertain world, cooperative boards of directors face enormous internal and external challenges. Many of these challenges stem from factors not in their control yet consume a great deal of attention. Other challenges more routine, are relegated to management, diluting the board’s influence over new strategy or direction. This may perpetuate the perception that the professional manager is more equipped to oversee leadership issues. The complexity of these challenges requires a higher-level thinking and superior board leadership to mitigate shifts in customer needs, profitability, and future sustainability. 

    Usually, leadership development training for co-ops, stems from informal, unstructured, and “on-the-job” training. Although experience is a great asset, this learning process lacks the rigor of leadership technique and understanding and should not replace profession governance principles. The truth is new and continual leadership training is an essential activity in building effective boards and successful businesses. The responsibility of the governing board of directors is to lead strategically and intentionally to ensure sound governance prevails. The goal of the co-op should be to thrive, not simply survive.

    Therefore, it is incumbent that co-ops should evaluate director performance and provide training opportunities for improvement. More importantly, a comprehensive and multidimensional approach to teaching effective leadership will not only grow better leaders but will lay the groundwork for a culture of continual learning. 

    Fortunately, a well-researched framework and teaching model has emerged to help both new and seasoned leaders build and hone their personal leadership skills. The Multidimensional Leadership Model & Assessment, (Friend, 2020), identifies six leadership competencies and measures an individual’s proficiency in each level. Different from other management training, this model recognizes the unique skill set necessary to govern effectively. The six areas measured are consciousness, conduct, connectedness, interaction, representation, and cooperation.

    The Leadership Lab website provides an online assessment tool to help individuals expand their leadership capacity, helping to serve effectively on a board. Developed by Texas A&M University researchers and co-op extension practitioners, the Leadership Lab integrates a grounded theory with practical application for leadership improvement. At the Leadership Lab, you can find the Multidimensional Leadership Assessment tool, which will measure all six competencies, providing participants with immediate feedback and suggestions to correct leadership deficiencies. Generally interrelated, competence and board effectiveness complement the qualities of the individual director, which improves dynamics in the boardroom and strengthens organizational performance (Coulson-Thomas, 1994). By assessing individual director competency and providing prescriptive suggestions for improvement, the collective board is strengthened and performs better. The Leadership Lab offers co-op directors, other boards of directors, and individuals the opportunity to learn and grow into the leaders they want to be.

    If interested in learning more and accessing the multidimensional leadership assessment, go to: leadershiplab.online

    References:

    Coulson-Thomas, C. (1994). Developing directors: Building an effective boardroom team. Journal of European Industrial Training, 18(6), 29-52. 

    Friend, D. (2020). Texas agricultural cooperatives: A study in governing competencies. Texas A&M University, Dissertation.

    Northouse, P.G. (2016). Leadership: Theory and practice. Thousand Oaks, CA: SAGE.

    Friend, Diane. “Making Effective Board Leaders in Your Cooperative.” Southern Ag Today 4(45.5). November 8, 2024. Permalink