Chicago Board of Trade rice futures closed lower on Monday, pressured by worries about future US export demand after the United States found unapproved genetically modified rice in some commercial long grain rice, traders said.
"With the discovery of GMO rice, EU environmental groups are trying to get all rice imports barred from coming in. It's very similar to the starling issue we had in corn a few years ago," said Shawn McCambridge, analyst with Prudential Securities.
In 2000, unapproved GMO corn starling was found in US corn and US exports to Asia suffered. September rice ended 28 cents lower at $9.55 per hundredweight.
New-crop November closed 26 cents down at $9.84. This was first time in nearly a week that November rice closed below $10.
Sell-stops were triggered throughout the trading range, sending November rice 35 cents lower to $9.75. Speculators were liquidating long positions with selling broad-based among commission houses.
Underpinning the market and keeping it from falling more was commercial buying by RJ O'Brien and Man Financial.
An estimated 1,630-rice future and 327 options traded. That compared to 1,634 futures that traded on Friday. US Agriculture Department late on Friday said that Bayer Crop Sciences reported to the agency there was "trace" amounts of genetically modified rice found in commercial long grain rice.
This was the first time unmarked GMO rice was found in commercial rice, USDA officials said. Even though US officials stressed there was no human health or environmental risk, Japan announced on Monday that it suspended imports of US long-grain rough rice.
That announcement was more psychologically bearish than anything else as Japan does not import American long grain rice but is a big importer of medium grain rice, traders said.
However, traders were worried that Japan's move could stir the European Union to take a similar stance. "The European Union is much more of a significant item as they are a very large importer of American long grain rice," said Gnomon Coleman, analyst and rice broker from Briskly, Arkansas.
The European Union imported about 300,000 tonnes of US rice last year, with 85 percent of that long grain rice. So far, EU authorities have not decided whether to ban American long grain imports, waiting for more details on how the unauthorised biotech rice made its way into US exports.
"EU that's the largest market for US long grain rice, so it will take awhile to get this all resolved," McCambridge added. About half of the US rice crop is exported each year and 80 percent of it is long grain varieties. Mexico and Japan are the largest importers of US rice.
Mexico, the No 1 buyer of US rice, imported about 750,000 tonnes of US rice in 2005. Mexico takes mostly short and medium grain rice. The CBOT said in a statement late on Friday its rules allow GMO-rice to be delivered against its futures contract. Underpinning the market were worries about China's rice crop as that country faces its worse drought in 50 years.