The prices of rice – the main food of billions of people in Asia and Africa – have increased to 15-year high due to rising demand, export restriction in some countries, and a decline in supplies caused by adverse weather.
The price of Thailand’s 5% broken white rice so far has seen a third consecutive week of increase, reaching 659 USD/ton compared to prices ranging from 653-657 USD/ton of Vietnam’s rice of the same type.
This is the highest price of Thai rice since October 2008 which is 38% higher than at the beginning of this year. The prices in many other rice export hubs in Asia have even increased by 40-45% this year.
CAUSES OF HIGHLY INCREASING RICE PRICES
According to experts, there are two main reasons for the sharp increase in world rice prices this year. First, India restricts rice exports. Second, dry weather adversely affects rice production in many countries. These two factors lead to a tightening of supply in the global rice market, as a result, rice prices increase.
World rice prices hit 15-year high.
India – the world’s largest rice exporter – has seen rice production decline due to less rainfall caused by the El Nino. To ensure domestic food supply and control food price inflation, this country decided to limit rice exports in 2023 and expected to maintain this until at least mid-2024. Not only in India, El Nino – a weather phenomenon with little rainfall and long periods of drought – also affects other major rice-producing countries such as Indonesia and Thailand.
“The high price of rice should have encouraged farmers to grow more rice. However, there are concerns about low levels of water sources. This may cause a decrease in rice production. Rice production in India and Thailand will decline in the first quarter of this year. For Indonesia, the water level of the reservoirs to supply the crops in 2024 has dropped sharply due to the dry weather, ”said Peter Clubb, an analyst at the International Grains Council in London.
In the US, many rice-growing states such as Arkansas, California, and Louisiana may reduce the area in 2024 as more farmers switch to soybeans.
Meanwhile, the sharp increase in rice prices this year has caused many countries to purchase more rice for reserve because of concerns that the global rice supply will tighten further due to El Nino.
Indonesia, for example, signed an agreement to buy 02 million tons of rice from Thailand in 2024, and another 01 million tons of rice from India. The Philippines signed an agreement to import 500,000 tons of rice from December 2023 to the end of February 2024. However, global rice trade in the 2023-2024 season is forecast to decline due to weaker demand from Asian and African countries.
In the context of India maintaining restrictions on rice exports, Thailand is expected to have less excess rice to export. “With the absence of India, Thailand and Vietnam are expected to account for a large proportion of global rice exports. The price of rice will therefore be more sensitive to weather conditions in these two countries, ” a report by BMI research firm said.
UNCERTAIN GLOBAL FOOD SECURITY
The El Nino is forecast to continue in 2024, posing risks to the supply of not only rice but also other food such as wheat, corn, soybeans, palm oil…Global food prices are at risk of escalating, causing challenges to economic growth and efforts to fight inflation of central banks, as well as declining the living standards of billions of people in the world.
Global food prices next year are more likely to increase than decrease.
After several years of sharp rises, wheat, corn, and soybean prices are on the way to complete a year of declines in 2023, as agricultural export bottlenecks on the Black Sea are removed and the global economy slows down. Analysts and traders said there is a risk of a supply shock in 2024.
“The picture of grain supply has improved in 2023 with greater production in some key producers. But the world has not yet escaped from food difficulties, ” Mr. Ole Houe, Director of agricultural consultancy and brokerage IKON Commodities in Sydney, said: “The El Nino can last until at least April-May 2024. Brazil will produce less corn, and China is surprising the market by increasing the purchase of wheat and corn on the international market. ”
India’s next wheat crop is threatened by dry weather. This situation could force the world’s second-largest wheat consumer to import wheat for the first time in 06 years as wheat stocks at national warehouses have fallen to a seven-year low.
In Australia – the second-largest wheat exporter in the world, the wheat crop that starts in April could take place in the absence of rain. This year, peak drought has damaged Australia’s wheat production, ending three years of bumper crops.
Concerns about declining wheat supplies from these countries could encourage wheat-importing countries to increase imports from other sources in North America, Europe, and the Black Sea region.
The good news is that South America’s corn, wheat, and soybean production is forecast to improve in 2024, despite fluctuating weather in Brazil.
Global palm oil production is likely to decline in 2024 due to El Niño, which may cause an increase in cooking oil prices.
“Grain and oilseeds inventories are being tightened. The Northern Hemisphere is likely to experience a strong El Nino. The USD will continue to depreciate, and global food demand will return to a long-term upward trend. Global food prices next year are more likely to increase than decrease, ”said a report by CoBank – a bank specializing in agricultural loans in the US./.