A “perfect storm” can be formed in Asia due to the escalation of rice prices…

Rice prices on the world market have risen to their highest level in about 12 years after India imposed export restrictions and adverse weather caused a decline in rice production in Asia. A “perfect storm” can be formed in the region because of the rice price escalation, CNBC News said.

“Global rice price movements are causing particular concern. The instability of rice prices will continue in the coming months, ” Senior Director Qingfeng Zhang of the Asian Development Bank (ADB) told CNBC.

Will the sharp increase in rice prices cause inflation in Asia to go up?

Apart from India, food price inflation in other Asian economies has been relatively settled so far this year. However, many factors lead to concerns that rice scarcity may cause the increase again on a large scale for other commodities on the regional market. These include extreme weather events caused by global warming, the return of El Niño after seven years, Russia’s withdrawal from the Black Sea, and rising food protectionism in the form of trade restrictions.


At the peak of the 2010-2012 food crisis, the ADB estimated that a 30% increase in world food prices in 2021 would led to a 10% increase in food prices in developed Asian economies while reducing 0.6 percentage points in the gross domestic product (GDP) growth rate of food importing countries in the region.

In an estimate that reflects the erosion in purchasing power that rising food prices can cause, the ADB said that during that crisis, every 10% increase in food prices in developing Asian countries pushed 64.4 million people into poverty, with a poverty level of $1.25 a day. That means there was an increase in the poverty rate from 27% to 29% during that crisis.

Most Asian countries are now capable of a rice supply shock.

“Rice prices have risen sharply, leading to warnings and stories of people rushing to buy rice. But if you look at the figures in terms of total supply and demand, Asian countries are in a good position to overcome the supply-demand shock in the rice market, ” Ms. Erica Tay, an economist at Maybank, said.

Ms. Tay stressed that some Asian countries such as Thailand, Vietnam, Myanmar, and Cambodia are net rice exporters. China, the world’s largest rice market, imports only 1% of its domestic demand, mainly from Vietnam and Myanmar. Therefore, it is “very little affected” by supply disruptions from India.

In addition, this rice price increase comes when global food prices are generally low. The global food price index of the Food and Agriculture Organization (FAO) has decreased by 23% from its peak set in March last year, Ms. Tay noted.

Rice supplies in China are under threat after an upgraded flood warning in three provinces that account for nearly a quarter of the country’s rice production. However, according to Ms. Tay, China’s rice reserves can now meet a minimum of eight months of the country’s annual consumption needs.

“This is a legacy of the Covid era. Countries realize that they need to be prepared to overcome disruptions such as trade shocks or agricultural supply shocks. They have learned their lesson from the last 3 years, and thus set up large reserves, ” Ms. Tay said.

However, the expert believed that with the weather conditions of the El Niño phenomenon likely to occur shortly, specifically in the second half of this year, food supply disruptions may happen on a larger scale. The biggest concern is that not only is rice supply affected but overall agricultural production is at risk of decline. “Such a decline could lead to higher consumer price inflation,” she said./.