Looking to the Futures

Rice futures (/ZR, currently scheduled for July delivery) are among the top performing futures contracts over the past month (+20.87%) and year-to-date (+30.47%). Increasing costs for fuel and fertilizer have combined with pest and weather concerns to put upward pressure on prices. Reduced planting acreage has also contributed to performance of the futures contracts.

To examine fuel costs, just look at the quote on heating oil futures (/HO) which are up 66% on the year. Heating oil futures call for delivery of ultra-low sulfur diesel, the primary fuel for farming equipment and shipping. Fertilizer costs are a little harder to track, but the Economic Data section on thinkorswim contains data on fertilizer prices. The Producer Price Index for Nitrogenous Fertilizer Manufacturing is up nearly 15% for the year and has risen for ten months straight. Because the fields are flooded, rice producers must use specific ammonium fertilizers like anhydrous ammonia (+30% ytd) and urea (+52%) whose prices have risen even faster. The increases in fertilizer prices are especially impactful for farmers in the South where most rice cultivation occurs. While two thirds of farmers in the Midwest pre-booked their fertilizers before planting season, less than 20% of farmers in the Southern region did.

On the supply side, an insect species called the rice delphacid has made it to the United States through Central America and Mexico. It was first found in Texas in 2015, with sporadic appearances since then, until last year where it was also found in Louisiana and Arkansas, two of the largest rice-producing states. The pest can cause yield losses of between 20% and 75% if left untreated, and is especially harmful to ratoon crops, which are a secondary growth of crops from the root after the initial harvest. In rice, this second harvest can produce around one third of the primary crop yield.

Weather is also expected to impact production, primarily in South and Southeast Asia. The El Nino weather pattern is expected to emerge around July. If it comes to pass, it is likely to reduce monsoon rains in India and Bangladesh, two of the top three rice producers. El Nino is also expected to lead to hotter and drier weather in Southeast Asia. On average, the weather pattern reduces global crop production by about 3.5%.

The USDA’s May World Agricultural Supply and Demand Estimates report projects rice production to decline by 15% for the next marketing year. Total production is expected to decline by 31 million hundredweight to 175 million hundredweight, the lowest total since the 2022/2023 marketing year. The decline is due to lowered estimates of planted acres. Total area is expected to decline by 17% to 2.27 million acres. That is expected to be partially offset by a 3% increase in yields to 7,732 pounds per acre.

Natural gas futures (/NGM26) ended Friday’s session lower (–0.43%) as U.S. natural gas storage levels remain ample for this time of year.  

The U.S. Energy Information Administration (EIA) reported U.S. natural gas inventories saw a 63 billion cubic foot (Bcf) build during the week ending May 1. This was below expectations for a 74 Bcf storage build. U.S. gas inventories are currently 6.7% above the 5-year average and 3.5% above last year.

The National Weather Service’s Climate Prediction Center expects temperatures from May 14 to May 20 to be near normal to above normal for all of the lower 48 states. 

Canadian dollar futures (/6CM26) ended the week lower (–0.33%) following the release of weaker than expected employment data on Friday. Statistics Canada reported employment declined by 18,000 in April vs. expectations of a 15,000 jobs gain. The unemployment rate rose by 0.2% to 6.9% in April, which was a six-month high. 

Corn futures (/ZCN26) closed higher on Friday (+0.80%), with the lead-month July contract rebounding from two-week lows made earlier in the week. The USDA reported old-crop corn export sales totaled 1.362 million metric tons during the week ending April 30. This was down 18.1% from the same period last year. U.S. producers have planted 38% of this season’s corn crop as of May 3, which was on par with last year but 4% above the five-year average. 

Major economic reports, trading events, and news items that could potentially impact specific futures markets:

Existing Home Sales for April (interest rates)

9-Day SMA:                     100.91

20-Day SMA:                    96.2

21-Day EMA:                    97.91

50-Day SMA:                    93.06

100-Day SMA:                  76.86

200-Day SMA:                  69.40

14-Day RSI:                      48.51 

New futures products are available to trade with a futures-approved account on all thinkorswim platforms: 

• Ripple (/XRP)
• Micro Ripple (/MXP)
• 100 OZ Silver (/SIC)
• 1 OZ Gold (/1OZ)
• Solana (/SOL)
• Micro Solana (/MSL)

Visit the Schwab.com Futures Markets page to explore the wide variety of futures contracts available for trading through Charles Schwab Futures and Forex LLC.