Rice Commodity Trading, Harvest Profits From Rice Prices
With the recent world food panic, traders see rice commodity trading as a way to gain exposure to this important grains sub-sector within the agricultural commodities sector.
The trend seems to have been as the price of crude oil has risen, so too has that of the grains, given the costs of processing and transport to markets.
Rice is the third most widely grown crop in the world after corn and wheat, and there are a number of different types, including brown, black, red, green and white rice.
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The consumption patterns for this important grain show that it is the number one food staple for over 50% of the world. The vast majority (over 90%) of global rice is grown and consumed in Asia.
Typically the growth cycle of rice is between 3 to 6 months. Growing rice requires on average a relatively high temperature and crucially a very reliable supply of water. It takes 5,000 litres of water to produce a kilo of rice.
The other important consideration is the relief of the land, where it is best for flat sections of land to be used, so that water irrigation can be evenly distributed and subsequent drainage.
World Rice Producers and Exporters
The top 5 producers in the world are China, India, Indonesia, Bangladesh and Vietnam, and the USA comes in 11th position, producing less than 2% global rice production , but responsible for 12% of world exports.
Estimated global production of milled rice for 2008/9, according to the USDA in August 2008 was 431 million tonnes (mt) (425.3 mt; 2007/8), which on the basis of land available for planting equates to a yield of 4.14 tonnes per hectare.
World rice consumption is estimated at around 428 mt for 2008/9 (424.2 mt; 2007/8), while year end stocks for 2008/9 are likely to come in at 81 mt (77.2 mt; 2007/8).
Around 85% of world exports come from just six countries, led by Thailand as the largest, followed by Vietnam, India, USA, Pakistan and China. US Rice Production
The main rice growing areas in the USA are Arkansas, Louisiana, Mississippi, Missouri, Texas and California. With climate change likely to have a profound impact on weather patterns, including frequency and severity of hurricanes, volume and timing and frequency of rainfall, as well as changing temperature profiles, planting programmes may need to be adjusted.
These seasons may start to be affected by the above changes and so yields could also be under pressure. Harvesting is normally in the July for Texas and Louisiana while the other southern states start the process from September. Information on other agricultural and soft commodities WheatSoybeanCornSugarCoffeeCocoa Rice Commodity Trading
While producers and end users will use rough rice futures traded on CBOT to hedge their businesses, it is also possible for traders to make profits by entering rough rice futures contracts, using an electronic trading platform offered by a number of commodity trading brokers.
We have seen how the food commodity crisis caused the markets to surge and rough rice prices hit an all-time record in April 2008 of around $25 per hundredweight.
Over the longer term given the projections for global population growth, it would seem that the demand – supply balance will remain tight. A number of commentators such as Jim Rogers have pointed out how a number of agricultural inventories are at 50-60 year low points, and the World Bank President has signalled the need for serious action to boost yields, given the population pressures on food demand. Related Articles: Given these conditions, together with the challenges of more volatile weather patterns, the future prospects for grains and for rice commodity trading possibilities in particular, are very interesting.
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