Serving the Rice Milling Industry Since 1917

Question & Answer about Rough Rice Pricing

About Rough Rice Pricing, Basis, Milling Yeild Adjustments and More. Click on a question to find your answer. If you still have questions, feel free to contact us through our contact form here.

  • How are Milling Yield Adjustments made? Open or Close

    Using Example #1 above: 

    Whole Kernel Basis is $ 23.67
    Broken Kernel Basis is $ 16.00

    The Price offered to the Farmer at his bins: $ 13.17 / Cwt for a 55/70

    .55 Lbs of whole kernel X $ 23.67 =                   $ 13.02 Value per Cwt
    .15 Lbs of Brokens X $ 16.00 =                         $   2.40 Value per Cwt
    Less Milling and Freight                                     <$   2.25>
                                                                              $ 13.17 / Cwt for a 55/70

    Assume delivery is made with a Milling Yield of 58/69 then the rice would be adjusted as follows:

    .58 Lbs of whole kernel X $ 23.67 =                   $ 13.73 Value per Cwt
    .11 Lbs of Brokens X $ 16.00 =                          $  1.76 Value per Cwt
    Less Milling and freight                                      <$   2.25>
                                                                              $ 13.24 / Cwt for a 58/69

    Assume delivery is made with a Milling Yield of 63/72 then the rice would be adjusted as follows:

    .63 Lbs of whole kernel X $ 23.67 =                    $ 14.91 Value per Cwt
    .09 Lbs of Brokens X $ 16.00 =                          $ v 1.44 Value per Cwt
    Less Milling and freight                                      <$   2.25>
                                                                              $ 14.10 / Cwt for a 63/72

  • How are Milling Yield Adjustment Factors Determined? Open or Close

    As per the examples above you can see how the value for whole kernels and broken kernels are developed.  Using these same factors adjustments are made for milling yields that differ from the original contact.  

    In Example #3 above, values are as follows:

    Value for 100 lbs of whole kernels $ 21.76 / Cwt

    Value for 100 lbs of broken kernels $ 16.00 / Cwt

    Assume Milling and Freight is $   2.25 / Cwt

    The numbers above represent the basis for the rice that will be bought against the sale price used in Example 3.  This basis is available to every grower when he is inquiring about a price from Farmers Rice Milling Company.  It is also written on every contract Farmers Rice Mill issues to a grower.   This basis determines what price is paid for a grower's rice and is the same basis that is used to adjust a lot or rice once it is received at the mill. 

    In essence, a grower is selling whole and broken kernels when he is selling his rice and each has a different value.

  • Where do I find basis information on my contract? Open or Close

  • Who can I contact to find my basis information if I don’t have a copy of my contract? Open or Close

    You can contact Farmers Rice Milling Company or your sales agent.

    At Farmers Rice Mill Contact:

    Ashley Gothreaux: 337-421-6342
    Philip Bertrand:      337-421-6313
    Pat Hartwell:           337-421-6371

  • Is there a spreadsheet that can help me calculate Milling Yield Adjustments? Open or Close

    Yes.  Below are two spreadsheets.  One is based on prices per Cwt and the other is based on prices per BBL.  You will need to enter your contract basis or the current basis offered in the market into this spreadsheet.  With that information the spreadsheet will automatically show adjustment factors for different milling yields.   

    Click to download - Rough Rice Pricing Per CWT
    Click to download - Rough Rice Pricing Per BBL

  • Why do Mills get in and out of the Market so often? Open or Close

    Our goal as a miller is not to speculate but to make a margin on milling rice each and every day of the year.  With that in mind we try not to go long or short in the market place.  Therefore, when we sell milled rice into the market, we try hard to buy Rough Rice to cover what we sell.  If we make a sale for 5,000 MT of milled rice it allows us to enter the market to buy approximately the following:

    5,000 Metric Tons of Whole Kernels
    5,000 MT X 22.046 Cwt / MT = 110,230 Cwt of whole Kernels
    110,230 Cwt / .58 Lbs of whole kernel per Cwt of Rough Rice = 190,052 Cwt of Rough Rice.

    Once we cover that sale we get out of the market until we make another sale.  Sometimes we will buy rice in anticipation of making a sale.  The method of entering the market to buy rice is the same as if we had already made the sale.  

  • What is the appeal process? Open or Close

    As a customer of FRM, our goal is to accurately assess the milling and grade of the rice we receive.  As a supplier of FRM, we want you to understand the procedures we use in assessing incoming rough rice and know that there is an appeal process that is in place if you do not agree with our milling and grade assessment.

    Milling Yield and Grade Determination Procedure

    Standard Mill Yield (M/Y) and Grade Assessment:  All rough rice delivered to FRM is sampled and graded on a per truckload or rail car load basis.  Each sample is tested independently to assess a M/Y and grade.  The results of each sample are posted on the contract summary report that is used to develop an average M/Y and grade for any lot of rice delivered.  Additionally, a portion of each sample is retained to produce a composite sample of the entire lot of rice being delivered.  This composite will represent an accurate sample of the entire lot of rice delivered and will be retained for further testing if necessary.  

    Upon completion of delivery, the producer and/or the sales agent will be notified of the lab results and pricing of rice delivered.  Method of notification will be in the form of the contract summary report.  FRM will assume the milling, grade, and price on the contract summary are acceptable to the producer.  If they are not, the producer or sales agent must notify FRM rough rice personnel that they wish to appeal the milling and/or grade determination made by FRM.  By asking for an appeal, the results of the appeal will be final.  A seller does not have the opportunity to retroactively choose between the results.     

    Appeal procedures for final milling yield and grade determination

    Procedure 1: Milling yield and grade will be determined by testing the composite sample maintained on each lot or bin of rough rice delivered.  FRM personnel will identify the composite sample, and with use of a Boerne divider, split the sample down into two (2) 100 gram samples which will be run on two separate lab machines.  Standard internal testing procedures will be used in the test.  Written results of the average milling of the two milling machines will be used to determine a M/Y and grade for this appeal.  The results of this appeal will be submitted to the grower or his sales agent with any milling, grade and price differences.  If the grower disputes these sample results, the grower can request an appeal to the USDA-FGIS grading lab located at FRM.  Steps for this appeal process are listed in procedure 2.  Again, by asking for an appeal, the results of the appeal will be final.     

    Procedure 2:  Final milling yield, grade and price will be determined by requesting an appeal to the USDA-FGIS grading lab located at FRM.  FRM scale room personnel will identify the composite sample in question and notify FRM quality control personnel.  FRM scale room personnel will properly fill out Form FGIS -907 and place inside composite sample. 

    FRM form (Producer Rough Rice Appeal Procedure) will accompany the request to FGIS.  FRM quality control personnel will deliver the composite sample to FGIS personnel who will analyze the sample and provide written results on FGIS Form 994.  The grower and or sales agent will be notified of the results.  Final price determination will be made using the FGIS milling yield results and grade discounts when applicable.   

    Any seller or his sales agents are welcome to come observe the procedures used at Farmers Rice Milling Company to analyze incoming raw materials.  We also welcome and encourage you to be present to observe the handling and testing of any rice that is going through an appeal process.  Our goal is to be fair to all parties involved in each and every transaction.

    Request for Composite or FGIS Download Document

  • How does the Mill determine a Price for My Rough Rice? Open or Close

    Prices for Rough Rice are determined based on what a buyer of milled rice is willing to pay.

    Example #1

    Let’s assume a domestic buyer is willing to pay $23.50 per Cwt for a U.S. # 2 Long Grain Milled Rice, Maximum 4% broken kernels, bulk (loose, not packaged) loaded in a truck or hopper car at the sellers Mill.  Then the calculation would be as follows:

    Buyer’s Price: $23.50 / Cwt or 100 Lbs. 

    From the buyer’s price, a mill has to deduct any costs it incurs to package, handle, grade, or transport this rice for the buyer. For this example we are going to say it costs $ .10 / Cwt to load the rice in a truck or rail car and $0.04 / Cwt to have FGIS grade this rice.  

    Buyers Price:                                          $  23.50 
    Less: Loading and grading costs:    <$      .14>
    Price after sales expenses                  $ 23.36

    The price offered by the buyer is a price for 96 pounds of whole kernels and 4 pounds of broken kernels.  This is determined by the specification that allows 4% broken kernels in the sale of 100 Lbs of Milled Rice.

    To calculate a price for purchasing rough rice a basis must be established.  This basis consists of a value for whole kernels, broken kernels and the costs to transport and process the rice.  For this example we will assume the market value for broken kernels at time of sale is $ 16.00 / Cwt.  The major markets for brokens are primarily beer and pet food companies.   

    4 pounds of brokens @ $ 16.00 / Cwt = $ .64 -- This is the value of the brokens in the mix of 100 pounds.

    $ 23.36 - $ .64 (value of the 4 pounds of brokens that will go into the mix)

    = $ 22.72 is the price the domestic buyer is willing to pay for 96 pounds of whole kernels.    To find the value for a 100 pounds of whole kernels take 

    $ 22.72 lbs divided by 96% = $ 23.67 / Cwt. 

     

    From the calculation and the market we know the following:

    The whole kernels for this sale are worth $ 23.67 / Cwt

    Brokens are worth $ 16.00 / Cwt

    Knowing these two figures allow the Mill to develop a basis that it will use to calculate a price for Rough Rice: 

    Based on the above a Mill would price Rough Rice as follows:

    Assume:  55/70 US # 2 Rough Rice located in Crowley, LA 

    .55 Lbs of whole kernel X $ 23.67 =        $      13.02 Value per Cwt
    .15 Lbs of Brokens X $ 16.00 =                $        2.40 Value per Cwt 
    Value of Rice based on current market     $      15.42 / Cwt

    Freight to the mill and cost of processing has to come off of the value:

                                                                           $     15.27
    Less Milling and Freight                           <$       2.25>*
    Price offered to Farmer at his bins:           $     13.17 / Cwt for a 55/70

    * Milling and Freight is the cost incurred to transport the rough rice from the farm or commercial drier to the mill and the cost for the mill to convert the rough rice into a finished product.  This number includes a profit margin for the mill.

     

    Example # 2

    Buyer offers $ 22.75 / Cwt Bagged at the Mill for US #2 / 7% Brokens
    Assume brokens are worth $ 16.00 / Cwt.

     Sales price for Rice bagged at mill                   $  22.75 
    Less the cost of packaging and bag                <$      .60>  
    Price after sales expenses                                   $  22.15 

    Less: 7 pounds of brokens @ $ 16.00             <$     1.12>
    Value of 93 lbs of whole kernels                         $  21.03

    Value for 100 lbs of whole kernel 
    $21.03 / .93 =                                                      $   22.61 / Cwt 

    Based on the above a Mill would price Rough Rice as follows:

    Assume:  62/70 US # 2 Rough Rice located in Crowley, LA

    .62 Lbs of whole kernel X $ 22.61 =               $  14.02 Value per Cwt
    .08 Lbs of Brokens X $ 16.00 =                       $    1.28 Value per Cwt
    Value of Rice based on current market            $  15.30 / Cwt

    Freight to the mill and cost of processing has to come off of the value: 

                                                                                   $  15.30
    Less Milling and freight                                     <$   2.25>
    Price offered to Farmer at his bins:                    $ 13.05 / Cwt for a 62/70

     

    Example #3  

    Example #3

    Buyer offers $ 519.84 / MT FOB Vessel. To convert to Cwt’s divide $ 519.84  / 22.046 = $ 23.58 / Cwt Bagged FOB Vessel for US #2 / 4% Brokens, Assume brokens are worth $ 16.00 / Cwt.

    Sales price for Rice bagged loaded vessel is    $ 23.58
    Less the cost of packaging, bags,
    freight to port, vessel loading costs
    and certification (FGIS and APHIS) costs:      <$   2.05>  
    Price after sales expenses                                    $ 21.53

    Less: 4 pounds of brokens @ $ 16.00              <$     .64>
    Value of 96 lbs of whole kernels                          $ 20.89

    Value for 100 lbs of whole kernel 
    $20.89 / .96 =                                                        $ 21.76 / Cwt

    Based on the above a Mill would price Rough Rice as follows:

    Assume:  62/70 US # 2 Rough Rice located in Crowley, LA

    .62 Lbs of whole kernel X $ 21.76 =                 $ 13.49 Value per Cwt
    .08 Lbs of Brokens X $ 16.00 =                         $   1.28 Value per Cwt

    Value of Rice based on current market              $ 14.77 / Cwt

    Freight to the mill and cost of processing has to come off of the value:

                                                                                     $ 14.77
    Less Milling and Freight                                      <$   2.25>
    Price offered to Farmer at his bins:                      $ 12.52 / Cwt for a 62/70

  • Can I place a Strike Price to sell my Rough Rice if the market reaches a certain price? Open or Close

    Yes.  Below is a copy of a strike price contract that you can enter into with Farmers Rice Mill.  This will allow you the opportunity to sell rice in the future if the desired price target is met.  If you are interested in participating in a “Strike Price Contract” please contact:

    Philip Bertrand
    Office (337) 421-6313
    Cell(337) 438-2132
    Pat Hartwell
    Office (337) 421-6371
    Cell (337) 523-5423

    Strike Price Contract - Click Here

  • What is the difference between Loan and Market Price Settlements? Open or Close

    This memo is meant to help explain the differences in two settlement procedures used commonly in the Rice Industry.  Under the written part of this memo is a spreadsheet that will clearly show you the financial impact depending on the type of settlement process used.  The prices used on this sheet are based on $14.05 / Cwt.  The chart has been prepared to show the relationship of the two settlement methods using a Milling yield of 55/70 to establish the Rough Rice price.  I used a 55/70 milling yield because it is used when dealing with loan premiums and discounts (LP&D) or (Loan) settlements.   Although there are other methods of settlement, this memo only addresses the two settlement methods listed below:

    Market Price Settlements

    This type of settlement is what Farmers Rice Milling Company uses.  This method takes the current market price for whole kernels and brokens at the time of sale and develops a price for the rough rice from these factors. Simply put, the milling yield (M/Y) times the value of the whole and broken kernels, less milling margin and freight, determines cash price.  On the attached spreadsheet the factors are:  Head rice (whole Kernel) $24.87, Brokens $17.50, Milling Margin & Freight $2.25.   In this method of settlement the market factors are used to determine the settlement price based on the final milling yield of the rice delivered under the contract.   Regardless of what milling yield is finally delivered, under the contact, the same market factors are used to make the adjustments, whether up or down.  These factors are constantly changing in the market so even though the purchase price of different contracts may be the same; the settlement values may differ.  This method of settlement has been around at least 20 years in Louisiana.  Year’s back, all prices were established on the actual milling yield from the samples brought to the "table" to be analyzed.  Now the LA industry just arbitrarily puts a 62/70 milling yield on all rice put up for sale.  Given the industry does not establish a true milling yield at sale, it is important that the adjustments are reflective of the market value of the product so that both seller and buyer are treated fairly in the transaction.  This is why we choose to use Market Price Settlements.  This basis of settlement would yield the same price to the grower weather the actual milling yield is established at contract or is established at the conclusion of deliveries.  It is a method we feel is fair to both the buyer and seller regardless of the changes in the milling yield from what is contacted for to what is actually delivered.  It essentially allows trade to take place fairly without knowing the true M/Y of the product being sold or purchased at the time of contract.

    Loans Premium and Discount Settlements (LP&D) or (Loan)

    Rough rice traders and most Long Grain Millers outside of LA commonly use this type of settlement.   This example uses the same factors listed above to calculate the original price for the rice based on a 55/70 milling yield.  Using 55/70 is the norm for pricing rice under the LP&D method of settlement.  No one, that I am aware of, uses any other milling yield as a basis for LP&D yield settlements.  The settlement values change as the milling yield change based on loan factors that are not relevant to the current market but relative to the loan program established by USDA.  Often in the trade, LP&D purchasers set minimums on whole kernel and total as a basis for sale.

    I hope this helps you better understand the differences in the two methods of settlement. If you look at the chart below you can clearly see the advantages of one program versus the other depending on the quality of rice that is delivered. If all rice was properly sampled and evaluated for quality before the sale the cash price under either method would be the same.   The method of settlement only comes into play when deliveries do not match what is contracted for.

    If you are concerned about the true value of your crop, collect good representative samples and have the milling yield established before you sell.  By doing so your crop will be priced based on the samples you collected.  This will give you a much more realistic idea of the value of your crop, all because you took the time to know the milling yield of your rice before you sold your crop.

    Loan vs Market Milling Yield Premium & Discount Schedule (cwt) - Document Download