CBOT Rice Review: Slips As Lack Of Demand Weighs (shrinking demand)

INO ^ | 10/08/08

[TigerLikesRooster]

CBOT Rice Review: Slips As Lack Of Demand Weighs

3 hours ago

CHICAGO (Dow Jones)--Chicago Board of Trade rice futures ended sharply lower Wednesday as a lack of demand continues to weigh on the market, an analyst said.

November rice ended down 40 cents to $17.30 per hundredweight and January rice ended down 41 1/2 cents to $17.62.

Prices have fallen sharply since hitting a high of $20.44 last month, when the market had rallied on concerns about the crop following hurricanes Gustav and Ike. Although the crop remains troubled, with lower yields expected, firstgrain.com analyst Ed Taylor said the trade is more focused on demand, or lack thereof.

The worldwide financial crisis is pressuring commodities across the board, and dampening demand expectations, rice included, Taylor said.

"People are just waiting on the sidelines, waiting for things to sort themselves out," Taylor said.

Traders said technically the market could be headed toward its August low of $18.11. Taylor said because rice is one of the few markets that hasn't taken out its August lows, it remains especially vulnerable.

[TigerLikesRooster]

Add to this the difficulty of financing due to current banking crisis. Some producers would be under serious financial strain. It could in turn drive some farmer to stop production. Supply may go down as demand does. The question is whether supply would go down faster than demand.

[TigerLikesRooster]

Ping!

[dynachrome]

Interesting. Stories of a rice shortage not too long ago.

[TigerLikesRooster]

Ping!

[Duke Phelan]

Don’t worry about excess supply of rice. If demand goes down then we can always turn the excess food into fuel for automobiles.

[TenthAmendmentChampion]

Could it be that money is now fleeing the commodities markets?

[Farmer Dean]

??? How can the credit crunch affect demand.People still need to eat.We were all following the rice shortage crisis earlier this year.

[TigerLikesRooster]

I think good deal of it must have been ripple effect from a oil bubble and general inflation at the time.
Now oil bubble burst and we have the prospect of possible deflation. It changes the game. If farmers can't produce because of financing problem, then high commodity price would be back and some speculator will tag along, too.