The Impact of El Niño on Rice Production and Trade in Asian Markets

Published 2023년 6월 20일

There are rising concerns over the potential effect of El Niño on Asia’s rice production and trade. Indonesia and Bangladesh are implementing measures to expand their rice stockpiles, while India, Thailand, and Vietnam anticipate increased demand for rice exports. Indonesian rice production is expected to reach a record low due to El Niño, prompting increased rice imports from India. Bangladesh has also increased its rice imports to secure domestic supplies. Consequently, Indian rice prices have surged but remain competitive. Thailand and Vietnam have experienced significant growth in rice exports, while global rice stockpiles are predicted to decrease. The impact of El Niño should be closely watched as it could further strain global rice supplies, potentially leading to higher prices and market volatility.

As the peak of the El Niño weather patterns approaches in July 2023, concerns rise regarding its potential to exacerbate drought conditions across Asia and cause a decline in agricultural production, including rice. Countries such as Indonesia and Bangladesh are taking measures to expand their rice stockpiles, while markets in India, Thailand, and Vietnam anticipate high demand for rice exports.

A staple food in Indonesia, rice faces significant challenges due to the predicted El Niño. The current year's rice production is expected to drop to 53 million mt, representing a decrease of 3% YoY. This set a record low in Indonesian rice production over the past five years.

Source: Indonesian Central Agency on Statistics

To mitigate El Niño’s potential impact on rice supplies, Indonesia announced in mid-June an increase in rice import quotas from two million mt to three million mt in 2023. Given Indonesia's comparatively small import market over the previous four years, the quantity of imports for 2023 is significantly high. The additional one million mt of imported rice will be sourced from India, ensuring a stable rice supply from potential shortages.

Source: Trademap

Bangladesh, another country affected by El Niño's impact, has taken steps to secure its domestic rice supplies. Bangladesh imported 634,000 mt of Indian rice in the first 11 months of the current financial year ending in June, demonstrating a 30% YoY increase. These higher rice imports instill optimism in Bangladesh's ability to maintain sufficient supplies in the domestic market.

With increasing import markets for Indian rice, India's rice prices have soared to their highest levels in the last decade, yet remain competitive with other major Asian players. The anticipated severe period of El Niño in 2023 raises concerns about rice production and puts further pressure on global prices. The three largest rice exporters in the world—India, Thailand, and Vietnam—are expected to increase their exports to meet rising demand.

Thailand's rice exports, for instance, witnessed a 20% YoY increase in the first five months of 2023 compared to the previous year, reaching 3.3 million mt. Thai rice exports are projected to reach 8.5 million mt in 2023. While Vietnamese rice exports in the first five months of 2023 reached 3.9 million mt, a 40% YoY increase, mainly supplying rice to the Philippines and China.

Looking ahead, it is crucial to monitor the impact of El Niño on global rice production. If the weather patterns prove stronger than projected, the production of global rice may significantly decline. According to USDA, the global rice stockpile is forecasted to decrease by 5% YoY to 173.5 million mt in 2023. Thus, the pressure on world rice prices is likely to persist, influenced by high demand and the anticipated decline in global rice stockpiles This scenario would strain global rice supplies and potentially lead to higher prices and increased market volatility