Global Rice Prices Surge to 11-year Highs Due to Limited Supplies
A crucial staple for over 3 billion people worldwide, rice is predominantly cultivated in Asia, accounting for nearly 90% of the region’s production. However, Asia's reliance on the water-intensive crop leaves it vulnerable to the effects of the current El Niño weather pattern – which typically brings reduced rainfall – raising concerns about the current crop's outlook. Despite the anticipation of a strong Asian crop, some prominent global trading houses, including Olam International, expect El Niño to have a detrimental effect on the output of rice producers such as India, Bangladesh, China, Indonesia, Thailand, and Vietnam. However, even before the impact of this weather phenomenon, rice prices exhibited an upward trend due to limited supplies.
The latest data from the United States Department of Agriculture (USDA) reveals that global rice inventories are projected to plummet to a six-year low of 170.2 million tonnes by the end of 2023/24, as stocks decline from major producers China and India, following years of increased demand. Consequently, the global rice price index published by the Food and Agriculture Organization (FAO) has soared, reaching its highest level in 11 years. The FAO All Rice Price Index averaged 126.2 in June 2023, reflecting a substantial increase of 13.9% compared to the previous year and reaching levels not seen since 2012.
Source: Tridge, FAO
As reported by the FAO, export prices of various rice varieties experienced notable increases in June. High-quality Indian Indica rice saw its price surge to USD 462.3/mt in June, marking a 6.7% rise from USD 434/mt in May and a considerable 33.6% increase compared to USD 346/mt in the previous year. Similarly, high-quality Thai Indica rice witnessed a positive trend, with its price reaching USD 528/mt in June 2023, representing a 1% MoM increase and a notable 13.8% YoY growth. Despite the 8.3% MoM drop in the price of high-quality Pakistani Indica rice in June 2023, settling at USD 489.2/mt, due to farmers attracting new export business by narrowing the price differentials with other origins, the price still reflected a substantial 23.3% increase compared to USD 396.7/mt in June 2022.
Source: Tridge, FAO
In recent weeks, wholesale prices of rice in India have also been rising due to low supply, indicating a significant upward trend. Tridge's wholesale data reveals that in Gautam Budh Nagar, Uttar Pradesh, Basmati rice varieties surged to USD 1.04/kg on June 26, marking a substantial increase of 17.3% compared to the previous year's price of USD 0.86/kg. Meanwhile, in Sehore, Madhya Pradesh, Basmati rice prices climbed to USD 0.52/kg on July 3, representing a notable 13% increase from USD 0.46/kg on June 26 and a significant 67.7% surge compared to last year. Additionally, in Hoshangabad, Madhya Pradesh, Basmati rice prices experienced a significant YoY growth of 54.8%, reaching USD 0.48/kg on June 19.
Wholesale prices have also risen in Indonesia, according to Tridge’s price index. In Central Jakarta, wholesale prices of the IR64 variety rose to USD 0.84.kg on May 22, a 12% rise compared to USD 0.75 on May 23 the previous year. Meanwhile, in Kramat Jati, East Jakarta, prices of IR64 rice climbed to USD 0.83/kg on July 3, a significant increase of 18.6% compared to USD 0.70/kg on July 4 last year.
Prices in the rice market are poised to surge significantly if yields experience a sharp decline due to the impact of El Niño. This weather phenomenon is expected to result in below-normal production for the second rice crop across most Asian nations. Thailand, the second-largest rice exporter globally, has advised farmers to limit their planting to just one rice crop due to a 26% rainfall deficit in May. Meanwhile, India, where the second crop is typically planted in November, has witnessed a 26% drop in summer-sown rice planting compared to the previous year, with monsoon rains falling 8% below the normal levels, according to government data. Although weather conditions in China, the largest producer of rice, have been unfavorable for the early season crop, the significant stockpiles could limit supply concerns to an extent. These factors collectively point toward potential supply shortages and increased price volatility in the rice market in the coming months.
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