Market Behavior

The rice market finally experienced a significant rally. This rally was driven by funds liquidating their short positions, as lower production is likely from many countries around the world. Some countries, including the U.S., have reduced acres due to low prices and high inputs. Other countries are expected to reduce fertilizer rates due to the high prices and logistical issues resulting from the Iran war and the closure of the Strait of Hormuz. The lower fertilizer usage is expected to result in lower yields.

There is also an increased chance of a strong El Niño this year, which often causes production issues in many Asian countries. Demand for rough rice is still sluggish, and the logistical issues in the Strait of Hormuz are halting much-needed flows of rice. These demand issues will improve over time and let the tightening supplies really take command for market direction. USDA’s March 31st Prospective Plantings report projected long grain acres down 24% in the U.S. Some market experts believe Arkansas acres will be considerably lower than the USDA projections.

The soybean market has trended higher in recent weeks, mostly driven by excitement around robust volumes in the EPA RFS/RVO renewable fuel policy. The war in Iran and the corresponding rise in crude oil prices also helped to lift soybean, meal, and oil futures. However, with every shift in the war dynamic, volatility has been dramatic. The March 31 acreage report from the USDA showed fewer soybean acres than expected, yet most traders expect actual acres to be higher than projected by the USDA. If the eventual acres exceed 85 million, it could be a drag on the market.

Soybean exports have been disappointing this year. Soybean exporting pace will need to improve in 2026/27 to clear the larger production. Soybean crush will continue to be strong, but capacity utilization has been high, so there is not a significant expectation for increased crush volumes until another round of crush plant expansion is undertaken.

Grayson Daniels
VP, Grain Merchandising & Procurement

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