When I first wrote this report I cautioned that the USDA number of 13.2 as carryout supply would not hold.  I forecast the USDA to lower the number down to 11.  Here is my analysis back in February.

"If we take the USDA error percentage which is a statistical average, we see the final range of long grain stocks is between 11.0 and 15.4.  If this is statistically sound as a standard deviation, it means that there is a 67% chance we will fall between those numbers and a 95% chance we will fall between 8.8 and 17.6 million cwt. or somebody has really messed up.   Looking back over recent history, the USDA numbers have been high for the February report so I will assume this is the case for 2004 and say the actual ending stocks is closer to 11 million cwt than 13.2". 

Now I will go out on the limb and say that the final number will be closer to 10.5 then the current 11.2.  Using the last WASDE report we find an interesting statistic, the average error remains at 16% from the April report to the final number.  This means that the range is somewhere between 9.4 to 13 million cwt.  Assuming that they are high, which given the export report is very likely, a 10% change to the downside is also highly likely.  That would bring in the final carryout to around 10.1 million cwt.  That is the number I'll use.  This should keep rice prices up into the new crop.

Bottom Line:  There is no room for errors.  Near term the market will need to absorb the large acres and good weather but long term, the market will look at demand and lower prices would bring about an even lower carryout;  one that the USDA says CANNOT happen.  The final rationing of the market will come quickly and hurt anyone short July.  At the same time, it will be hard to be long July for very long once rationing begins.  It is going to get interesting.

KEEP YOUR EYES ON THE EXPORT SALES SHEET.