“Do Not Put Too Much Stock In Chinese Rice Stocks Now"

MILO HAMILTON

AUSTIN, TEXAS
   As we have pointed out for some time, the rest of the world is going short rice stocks while China appears to be going long rice stocks. We say “appear” because our numbers come from inside the DC Beltway. China does not reveal its rice stocks to the public yet. They are a military secret. Its rice stocks have grown from 50 percent of world stocks in 2008 to 67 percent today, up 17 percent in world share of stocks. However, this is just an educated guess by our US Department of Agriculture. Is that bearish on world rice prices? Maybe so; but what is bearish on world prices is the projected 12.5 million MT of Indian rice exports in 2018. 
   Other commodities are feeling the heavy hand of China as well. Rice, wheat, corn and cotton have gained double digit share growth in the last decade since 2008 when rice prices topped out at $1000 per MT. Meanwhile US commodity stocks of everything are going nowhere fast since 2008. That makes sense as ag prices have gone much lower since 2008. Why stock what is cheap and is in oversupply? Just in time makes sense until the weather or market changes.
   China stocks more and more because it supports its farm gate prices at high levels with hundreds of billions in support payments over this past decade. Rice has 31 subsidy programs, for example. Despite the cut in the cotton program, China still has 45 percent of the world stocks. It owns supposedly 52 percent of world wheat stocks and 39 percent of world corn stocks. China and the US together control 68 percent of world corn stocks. Those corn stocks are for sale in the US, but maybe not so much for Chinese corn or rice. If the world is cutting its stocks of commodities because it thinks it could buy from China, it should really think again. Logistics there preclude any easy route to the sea. What is stocked in China, largely stays put in China. ∆
   MILO HAMILTON: Senior Economist at Firstgrain.com

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