The rice machine: how the price of a sack of rice is set

Market

13 de mar.

In short

The price of a sack of paddy rice is set by five factors: the international price, the exchange rate, export parity at the port of Rio Grande, supply and demand in Brazil, and the costs and margins down to the farm.
In 2025, the reference indicator fell almost 40%. In Uruguaiana, the price stayed below total cost (about R$ 93 per sack) for some 10 months of the year.
Farmers do not control the cycle, but they do control how much to plant, when to sell and how much risk to take on.

Introduction: "I did everything right. It was the price that failed"

If you grow rice, 2025 very likely left a bitter taste. The field yielded, productivity was good, the technology package was up to date, but the numbers did not add up.

For many months, the price of a sack stayed below total cost, even with a strong dollar and an export parity pointing to much higher values at the port of Rio Grande. The feeling was one every farmer has had at some point: "I did everything right; it was the price that failed."

Ray Dalio, explaining the economy, likes to say it works like a machine made of repeating cycles. Prices rise and spur investment; overinvestment creates oversupply; oversupply knocks prices down; low prices force adjustment… and the cycle goes on. In Rio Grande do Sul rice, between 2022 and 2025, that machine turned almost exactly like this.

The aim of this article is to open that machine piece by piece: explain how the price of a sack of rice is set, show where farmers entered the cycle, explain why so many worked at a loss in 2025 and, above all, how to bring to the farm a logic Dalio applies in financial markets: accept that you do not control the cycle, but you can build a strategy to get through it without going broke.

In 2026, the machine keeps turning. The difference is that we now have the full picture of the 2022–2025 cycle, the first projections for 2025/26 and the chance to use that lesson to change how you decide on area, timing of sales and level of risk.

1. When the farm gets it right and the cycle gets it wrong: the farmer inside the machine

From the farmer's point of view, the math looks simple: if I produced well, with good yields, I should make money. In farm logic, a good harvest year should be a year of relief.

But in the machine's logic, it is not your farm that sets the price. The price of a sack responds to the balance of world and local supply and demand, to the exchange rate, to logistics, to the decisions of other farmers who expanded area alongside you, and to the moves of major exporters such as India.

Between 2022 and 2025, Rio Grande do Sul rice lived through a classic script:

The high prices of 2022–2023 excited the sector.
Planted area grew strongly in regions such as the Western Frontier and the Southern Zone.
The 2024/25 crop was one of the largest ever.
In 2025, the domestic price collapsed, with a drop of nearly 40% in the reference indicator and months in a row of sales below total cost.

As a result, many farmers entered 2026 trying to "survive" and rethinking their planted area, not because they worked badly, but because they rode the euphoria phase of the cycle without protection for the adjustment phase.

2. The five gears of the rice machine

Dalio describes the economy as a machine full of gears that move predictably over the long term, even if they look chaotic in the short term. For Rio Grande do Sul rice, we can identify five main gears in price formation:

International price (Chicago and Asia).
Exchange rate.
Export parity at the port of Rio Grande.
Supply and demand within Brazil.
Logistics, costs and margins down to the farm.

Let's open each one, as if we were in the workshop looking at the engine of your results.

2.1 International price: Chicago and the Asian market

Internationally, the tone is set by:

Rough rice futures on the Chicago Board of Trade (CBOT), which reflect price expectations for paddy rice over the coming months.
Physical export prices in Asia, mainly India, Vietnam and Thailand, which dominate world trade in milled rice.

When India restricts exports, the international price rises; when it goes back to shipping large volumes at competitive prices, the world index falls and drags the Brazilian rice price reference down with it. It is this international "tide" that lifts or sinks the value of your sack, without a single grain changing on your farm.

2.2 Exchange rate (R$/US$)

The international price is in dollars. To become real in Brazil, it has to be converted into reais:

Price in R$/t = International price (US$/t) × Exchange rate (R$/US$)

In theory, a strong dollar favours exporting farmers, because it raises the value in reais of the same tonne in dollars. In practice, that benefit only really shows up when the other gears are aligned: controlled supply, firm demand, reasonable export premiums and smooth logistics.

2.3 Export parity and the port of Rio Grande

Export parity answers the question: "if I take this rice and export it, what is it worth?". It takes into account:

The average price the exporter receives in US$/t.
The exchange rate.
Export premiums or discounts.
Port and logistics costs up to the ship.

In a snapshot from March 2025, that calculation came to about R$ 96.75 per 50 kg sack FOB Rio Grande. That is the theoretical value of the sack on board the ship: not yet the farm-gate price, but the "ceiling" from which the rest of the chain deducts freight, costs and margins.

2.4 Supply and demand in Brazil

The fourth gear is the cruellest when everyone gets excited at the same time. In 2024/25, Brazil harvested about 12.7 million tonnes of rice, with Rio Grande do Sul leading production. The problem is that domestic consumption did not grow at the same pace and, in several months of 2025, exports lost momentum.

With plenty of supply and weak outlets, the domestic price crumbles. Here the machine shows that producing well is not enough: if stocks build up and the exit door narrows, the price of a sack will try to "force" an area adjustment the hard way.

2.5 Logistics, costs and margins down to the farm

Between the theoretical FOB port price and the value that reaches the farm come:

Domestic freight (farm → mill → port, and back again in price formation).
Storage, financing and risk management costs.
Mill and trade margins.

In that same March 2025, while FOB Rio Grande parity pointed to about R$ 96.75 per sack, the average farm-gate indicator was around R$ 82 per sack. Roughly R$ 14 per sack "stayed along the way", adding up transport, financial cost, risk and the profit of those between your farm and the ship. That gap is not a mistake: it is the last gear of the machine.

3. Uruguaiana and Camaquã: the math of the adjustment

Leaving theory behind, let's go to the field, where the cycle turns into bills to pay.

3.1 Uruguaiana: 10 months selling below cost

In 2025, surveys in Uruguaiana show something like this:

Total production cost, including depreciation, labour and interest, about R$ 93 per sack.
Average price in November around R$ 54–55 per sack.
About 10 months of the year with the price below total cost.

In practice, every truck leaving the silo meant not just revenue, but also confirmation that part of the margin was slipping away. The farm delivered; it was the phase of the cycle that sent the bill.

3.2 Camaquã: same farm, same pain

In Camaquã, the picture was not very different:

Total cost around R$ 88 per sack.
Average price in November of about R$ 58 per sack.
At least 9 months with the market value below total cost.

These cases show that, in 2025, the problem was not a lack of work or productivity. It was the combination of a large crop with moderate demand, strong foreign competition and a domestic chain that passed little of the exchange-rate gains on to farmers.

4. Dalio's cycle applied to Rio Grande do Sul rice

Ray Dalio explains the economy as a set of repeating cycles:

Prices rise.
Profit attracts investment and expansion.
Overinvestment creates oversupply.
Oversupply knocks prices down.
Low prices force adjustment (area cuts, cost reductions, some going out of business).
With the adjustment, supply shrinks, prices rise again… and the cycle starts over.

Between 2022 and 2025, Rio Grande do Sul rice followed that script almost to the letter.

4.1 2022–2023: high prices and euphoria

Weather events, tighter supply and a good market moment supported high prices, at times reaching R$ 100–110 per sack in different markets. The prevailing feeling was: "rice is worth it again".

This is the phase of the cycle in which, according to Dalio, the system sows the seed of the next problem: high profit almost always leads to more investment.

4.2 2023–2024: area expansion in Rio Grande do Sul

Encouraged by prices, many farmers expanded their area. In Rio Grande do Sul, the area reached about 970 thousand hectares, led by the Western Frontier (Uruguaiana, Itaqui, São Borja) and the Inner Coastal Plain (including Camaquã).

On paper, it looked rational: seize the good moment, dilute fixed costs, gain scale. In the logic of cycles, it was the classic supply-expansion move that sets the stage for the next price drop.

4.3 2024–2025: big crop, steep price drop

With more area and favourable weather, Brazil's 2024/25 rice production was around 12.7 million tonnes. Throughout 2025, the average farm-gate price indicator fell close to 40%, taking the price to R$ 50–60 per sack while total cost remained at R$ 88–93 per sack in many regions.

It was the moment the cycle "charged" for the earlier euphoria. Those who went big on the crop, guided only by high prices, found a saturated market and a price formation that showed no mercy.

4.4 2025–2026: area cuts and an attempt to adjust

After an extremely tight 2025, the adjustment phase began. In several regions of Rio Grande do Sul, reports point to an area reduction of around 10% for the 2025/26 crop. Projections indicate Brazilian rice production would fall back to about 10.9 million tonnes, a drop of about 14% from the previous season.

This is the part of the cycle in which the system "corrects" the excess through pain: less area, less supply, some farmers leaving the crop, others cutting investment. In 2026, the debate becomes: "how far should area be cut?" and "how do we protect income in the next up and down cycle?".

4.5 From cycle to hedge: what Dalio would do if he grew rice

Dalio does not try to guess the cycle's next step; he starts from the principle that cycles will keep happening. That is why his approach is to build "all weather" portfolios, designed to survive different scenarios, boom or storm, without depending on calling the top or the bottom.

On the farm, hedging plays that role. Locking in part of the production in advance, through forward contracts, futures or options, applies the same logic in the field: giving up part of the potential gain in exchange for reducing the risk of a large loss. Instead of betting everything on a single moment of sale, price is treated as a risk to manage, not a lottery to "win".

5. Government stocks: why counting on Brasília is not enough

In theory, government buffer stocks are an important gear of the machine:

Buying when the farm-gate price is very low, taking part of the supply off the market and supporting prices.
Selling when there is a risk of shortages and consumer inflation.

In practice, public policy tends to move more slowly than the market. In 2025, while the farm-gate price collapsed and exports fell back in some months, announcements of purchases to build stocks only came later, followed in 2026 by additional financial support packages for the sector.

By the time those measures arrived, most of the income loss had already happened and the decision to cut area for 2025/26 had already been made on many farms. That does not make the policy useless, but it shows why it cannot be the central pillar of your strategy: if your survival depends on Brasília's timing, your risk is higher than it needs to be.

6. What you control from 2026 on

Faced with the machine and the cycle, it is easy to slip into fatalism: "there is nothing to be done". But Dalio insists on one point: understanding how the machine works is the first step to playing the game differently. You do not control Chicago, or India, or the exchange rate, or Brasília. But you do control a few key decisions: how much to plant, when to sell and how much risk to take on.

If in 2025 you felt you did everything right on the farm and still lost money, this is where strategy starts to change.

6.1 Decide area by the cycle, not just by last year's price

The area expansion between 2022 and 2024 was a direct reaction to the high prices of that period. It is human (every system reacts this way), but the effect was an oversupply that brought the market down in 2025.

From 2026 on, it makes more sense to:

Look at price + stocks + world crop projections + local projections.
Adjust area rationally, avoiding going big just when the trend points to surplus.

It is about bringing a cycle view to the area decision: seeing the latest price is not enough; you need to see which phase of the cycle you are in.

6.2 Plan sales in lots, with hedging and windows of opportunity

One of the main lessons of 2025 is that waiting for the "perfect price" tends to be expensive. Instead of concentrating all sales in one moment, it makes more sense to split the production and use hedges to protect part of the margin.

Some options:

Split the crop into blocks (for example: 30% locked in before harvest, 40% sold during harvest in favourable windows, 30% to negotiate later, watching the market).
Lock in part of the price with forward contracts with mills or on the futures market, taking a short position when the price level covers total cost and secures a minimum margin.
Use the moments when CBOT, exchange rate and export premiums are aligned not to "call the top", but to build the year's "sales portfolio", similar to an all weather portfolio, balancing risk and security.

Those who locked in part of their production when the sack was still at R$ 90–100, for example, were able to get through the drop to R$ 50–55 with part of their income protected. In Dalio's language, they did not avoid the cycle, but they reduced the impact of the bad phase on the business.

6.3 Track export parity against the local price

Another important discipline is to routinely track a few indicators:

International price (USDA and FAO reports, Asian quotes).
Exchange rate.
Export parity (FOB Rio Grande).
Reference indicator and regional quotes (Uruguaiana, Camaquã, etc.).

When the gap between export parity and the local price widens a lot, it signals a depressed domestic market and possible room for more exports or for revising the sales strategy. It is like watching the car's dashboard: you keep driving, but aware of speed, fuel and warning lights.

6.4 Build an information routine

Finally, recent experience showed that operating "blind" is costly. In a market of thin margins and violent cycles, those who only react to the day's price tend to be late for the most important decisions.

It is worth building a routine with:

Weekly market reports.
Tracking of the crop, exchange rate, exports and stocks.
Simple tools to simulate parity, cost versus price and hedging scenarios.

Over time, that routine becomes part of the farm's culture, just like soil analysis and planting planning. It is what turns the price machine from an invisible enemy into a familiar gear.

Conclusion: you do not run the cycle, but you do run your strategy

The rice machine will keep turning: India will alternate between periods of export restriction and expansion, the international price index will rise and fall, the exchange rate will swing, and the government will step in sometimes too early, sometimes too late. Those gears are beyond your control.

What is in your hands is deciding how much to plant, when to sell and how much risk to accept in each cycle. Ray Dalio did not build his strategy by trying to run the machine; he learned to respect the cycle and build portfolios that survive it. On the farm, the path is similar: understand the cycle, adjust area with a long-term view and use hedges to protect the margin in bad years, without depending on the "perfect price" or on government aid.

Understanding how this machine works is the only "harvest" that does not depend on rain and does not spoil in the warehouse. The sooner you build this view into your strategy, the less likely you are to relive in the coming years the adjustment Rio Grande do Sul rice went through in 2025, and the better able you will be to get through each phase of the cycle without putting the farm's future at risk.

Want to follow the reference price and plan the sale of your crop? Talk to Corretora Forgiarini: we have brokered the purchase and sale of paddy rice and type 1 milled rice since 1990.

Frequently asked questions about the price of a sack of rice

How is the price of a sack of paddy rice set?

The price of a sack comes from five gears: the international price (Chicago futures and Asian export prices), the exchange rate, export parity at the port of Rio Grande, supply and demand in Brazil and, finally, logistics and storage costs and margins between the farm and the ship.

Why did rice prices fall in 2025?

After the high prices of 2022–2023, planted area grew and the 2024/25 crop was one of the largest ever, about 12.7 million tonnes in Brazil. With stable domestic consumption and slower exports in several months, the reference indicator fell almost 40% over the year.

What is the difference between export parity and the price the farmer receives?

Parity shows what the sack would be worth on board the ship. In March 2025, it pointed to about R$ 96.75 per 50 kg sack FOB Rio Grande, while the farm-gate indicator was around R$ 82. The gap, about R$ 14 per sack, covers freight, financial cost, risk and margins along the chain.

How can farmers protect themselves from a falling sack price?

By selling the crop in lots, instead of concentrating everything in a single moment, and locking in part of the price with forward contracts, futures or options when the value covers total cost and secures a minimum margin.