Rice : CBOT Futures prices may fall 15%.

We don’t see much rice price analysis, or maybe it is our poor local language skills limiting our intake of the good stuff, but for those interested in the price of rice futures, we are worried a breakdown is coming – which will see the CBOT Rice Futures (ZR0Y) for the continuous contract, fall from where they are now – US$ 13.4….a good 15% or so to nearer US$ 11.5.

A hedge, or a punt, whatever you like on the breakdown at 13.25 might be considered by some.

Now if farmers could hedge their exposure….like they do in the west……

If the commodity is to rebound, we will be looking for a weekly close at 14 or better, but unless it somehow moves north of 14.80, we think the chances are better for a short term pullback as compared to another rally.

Indeed, there is risk of a more significant pullback to 10 or so, albeit a purely technical view, with no consideration given to global supply & demand and stocks whatsoever.

Let the markets help the farmers.

We understand rice is the most sensitive of all the soft commodities, and a story in today’s Bangkok Post caught our eye :-

Rice farmers are not happy with the cabinet’s decision on Tuesday to raise the price of pledged rice from 10,000 baht per tonne to 11,000 baht as it still does not cover the cost of growing a crop, Thai Farmers Association chairman Prasit Boonchoey said on Wednesday.

Farmers still have to meet a range of rising costs, including fertilisers and pesticides, said Mr Prasit.

“The rice price has not been raised for several years. The call for the rice pledging price to increase to 14,000 baht a tonne is not too high because prices of consumer goods have already gone up,” he said.

Prices not changing for years? No wonder the farmers are a tad unhappy. A quick look at the easily tradable CBOT Rice futures contract shows prices do change. Often. All the time in fact. Now we know a free and open rice futures market is but a dream in Thailand, but what about allowing rice farmers to trade rice minis? Easy to create, as a  CFD based on the underlying pricing of the CBOT, and they could be made very affordable, with say margin of 3000 Baht per mini contract.

CBOT Rice Futures : Rangebound for now

Its not easy following let alone chart Thai rice prices, so like most analysts we default to what we can find reliable data for, and for rice it’s the CBOT Rice futures. In simple terms ZR0Y has major support at US$ 13 and major resistance at 15. It’s currently at 14, so until a break one way or the other occurs, it remains a buy on weakness trade.

 

Rice Futures pop, but they’ll be back.

After hitting multi month, in many cases multi years highs over the past week or two most soft commodities have fallen heavily in recent days. As if by magic the G20 got a present in the guise of sharp falls in food futures, which stared around Feb 13 and was a coordinated attack, signaling the market makers and big prop desks in Europe Japan and Stateside decided to take some off the top and try and divert attention away from the recent huge rise in agricultural commodities prices since Bernanke bought his latest printer farm.

Take CBOT Rice futures, from a recent high of US$ 16.40 to around US$ 13.65 today. Or Indonesian crude palm oil, which is set to post its first monthly drop in 7.

Soybeans have fallen from US$ 1504 to 1280 or so over the last 11 days and CBOT Corn from 724 to 660 since yesterday.

However there is good reason supports will be found quite soon, and even more reason to believe some, if not all agri commodity futures will hit new highs over the course of 2011.

For CBOT Rice we’re looking to go long at 13.25 or so.

Soy will be a huge buy if it falls to 1200. We’re watching for a breach of  1288 as a sign of weakness, but if 1300 holds…then a rebound is very likely.

Buy at 630 for CBOT Corn

CBOT Rice Futures (ZR) : Approaching key support

CBOT Rice futures (ZR) peaked last week at US$ 16.40 and are fast approaching key support at 15.40.  A daily close below this level could well result in a pullback to 14.5 or so, but we doubt rice futures will go below 14.30, so a rebound trade can be considered in coming days.