Brazilian rice prices fall after government announces sale program amid market skepticism

Prices and offer levels in the Brazilian rice market have declined in the days leading up to Oct. 29 after the government announced its Rice Sale Option Contract, or COV, as part of the National Food Supply Plan, with market participants skeptical of the program's appeal to producers.

Platts, part of S&P Global Commodity Insights, assessed Brazil Long Grain White Rice and Parboiled Milled rice 5% broken at $798/mt on Oct. 29, down $11 on the week and $18 on the month.

The price has fallen $17, or 2%, since Oct. 15, the day before the program was announced, when Platts assessed long grain rice at $815/mt.

Additionally, offer levels for rice have decreased since the announcement, with the lowest offer heard in the week ended Oct. 25 reported at $800/mt FOB Rio Grande, compared to offers heard at $815/mt in the week ended Oct. 18.

A local source said the decline in offer levels was, to an extent, in response to the COV announcement.

The COV initiative, which was announced and implemented on Oct. 16 by Brazil's national agricultural agency, Conab, allocated Real 1 billion to purchase up to 500,000 mt of long grain rice from the 2024-2025 harvest from local farmers.

Market participants cited a number of concerns about the change.

“We are still trying to understand the whole concept of this option contract,” a source said.

A second source said that, at first glance, the program is "not very appealing for the producers.”

This uncertainty has “frozen our entire market,” the second source added, causing producers to anticipate low prices for the upcoming crop.

The shift in sentimentled many participants to believe prices will drop significantly in 2025, causing them to withdraw already booked orders.

While some acknowledged the program's importance, particularly in supporting indigenous communities, doubts remained about the communities' actual involvement.

Additionally, the government announced it was launching the "Arroz da Gente" program, effective immediately, to encourage rice cultivation in historically productive areas, focusing on traditional and indigenous communities to tackle food insecurity.

To further strengthen agricultural infrastructure, Conab has partnered with Itaipu Binacional, allocating Real 55 million for the renovation and modernization of grain storage facilities in Paraná and Mato Grosso do Sul.

While officials emphasized the program's potential to stabilize farmers' incomes, market participants awaited clearer guidance and potential adjustments to the program.