Bowl of white rice at Bamboo Sushi restaurant in San Ramon, California on January 23, 2022.
gado | Stock photos | Getty Images
From China to the United States to the European Union, rice production is plummeting and driving up prices for more than 3.5 billion people around the world, particularly in Asia-Pacific – which consumes 90% of the world’s rice.
The global rice market is expected to register its largest deficit in two decades in 2023, according to Fitch Solutions.
And a deficit of this magnitude for one of the world’s most widely grown grains will hurt major importers, analysts told CNBC.
“Globally, the most obvious impact of the global rice deficit has been, and still is, the decade-long high rice prices,” said Charles Hart, commodity analyst at Fitch Solutions.
Rice prices are expected to remain near current highs through 2024, according to a report from Fitch Solutions Country Risk & Industry Research dated April 4.
The price of rice has averaged $17.30 per quintal through 2023 since the start of the year and will only drop to $14.50 per quintal in 2024, according to the report. The cwt is a unit of measurement for certain products such as rice.
Since rice is the staple food in many markets in Asia, prices are a major determinant of food price inflation and food security, especially for the poorest households.
commodity analyst, Fitch Solutions
“Given that rice is the staple food in many markets in Asia, prices are a major determinant of food price inflation and food security, especially for poorer households,” said Hart.
The global deficit for 2022/2023 would amount to 8.7 million tonnes, according to the report’s forecast.
That would mark the largest global rice deficit since 2003/2004, when world rice markets generated a deficit of 18.6 million tonnes, Hart said.
Drained Rice Supplies
Workers cultivate rice seedlings at an agricultural service station in Hangzhou, east China’s Zhejiang Province, Sunday, April 16, 2023.
Edition of the future | Edition of the future | Getty Images
The shortfall is partly due to the result of “an annual deterioration in mainland China’s crop caused by intense heat and drought as well as the impact of severe flooding in Pakistan”, Hart pointed out.
Rice is a vulnerable crop and has the highest probability of simultaneous crop loss during an El Nino event, according to a scientific study.
In addition to tighter supply challenges, rice has become an increasingly attractive alternative following the surge in prices of other major grains since Russia’s invasion of Ukraine in February 2022, Hart added. . The resulting substitution of rice has boosted demand.
Which bowls of rice will be affected?
Lower rice production year-on-year in other countries like the United States and the EU also contributed to the deficit, said Oscar Tjakra, senior analyst at the World Food Bank. and Agriculture Rabobank.
“The global rice production deficit situation will increase the cost of importing rice for major rice importers such as Indonesia, the Philippines, Malaysia and African countries in 2023,” Tjakra said.
Many countries will also be forced to dip into their national stocks, said Kelly Goughary, senior research analyst at Gro Intelligence. She said the countries most affected by the deficit would be those already suffering from high domestic food price inflation, such as Pakistan, Turkey, Syria and some African countries.
China is the world’s largest producer of rice and wheat and is currently experiencing the highest level of drought in its rice-growing regions for more than two decades.
Senior Research Analyst, Gro Intelligence
“The global rice export market, which is generally smaller than that of other major grains…has been affected by India’s export restrictions,” said Hart of Fitch Solutions.
India banned broken rice exports in September, a move that Hart said was a “main price driver” for rice.
Surplus on the horizon
However, the shortage may soon be a thing of the past.
Fitch Solutions estimates that the global rice market will return “to an almost balanced position in 2023/24”.
This could lead to rice futures prices falling year-on-year below their 2022 level, but remaining high at “more than a third above their pre-Covid (2015-2019) average value”, in part as stocks are rebuilt after a period of sharp decline.”
“We expect the rice market to return to surplus in 2024/25 and then continue to ease in the medium term.”
Fitch further predicts that rice prices could fall nearly 10% to $15.50 per quintal in 2024.
“We estimate that global rice production will experience a strong rebound in 2023/24, expecting total production to increase by 2.5% year-on-year,” Fitch’s report forecast, building on the fact that India was the “main driver” of global rice production during the period. the next five years.
A combine harvester drives through a field during a wheat harvest at a farm in Karnal, Haryana, India, Thursday, April 13, 2023.
Anindito Mukherjee | Bloomberg | Getty Images
However, rice production remains at the mercy of climatic conditions.
While the Indian Meteorological Service expects the country receive “normal” monsoon rainsForecasts of intense heat and heat waves in the second and third quarters of 2023 continue to threaten India’s wheat crop, the report warns.
Other countries may not be spared either.
“China is the world’s largest producer of rice and wheat and is currently experiencing the highest level of drought in its rice-growing regions for more than two decades,” Goughary said.
Major European rice producing countries such as France, Germany and the UK were also hit by the highest level of drought in 20 years, she added.