According to Fitch Solutions, rice output in 2023 will see its greatest shortage in two decades. MarktBuddy
“The most visible impact of the global rice deficit has been, and continues to be, decade-high rice prices,” Fitch Solutions commodities analyst Charles Hart told CNBC.
Rice supplies are being stretched as a result of the ongoing conflict in Ukraine, as well as weather problems in rice-producing nations such as China and Pakistan.
Rice output is declining from China to the United States to the European Union, raising costs for more than 3.5 billion people worldwide, notably in Asia-Pacific, which consumes 90% of the world’s rice.
According to Fitch Solutions, the global rice market would see its greatest shortage in two decades in 2023.
Analysts told CNBC that a shortfall of this scale for one of the world’s most farmed cereals will impact big importers.
“At the global level, the most visible impact of the global rice deficit has been, and continues to be, decade-high rice prices,” said commodities expert Charles Hart of Fitch Solutions.
Rice prices are anticipated to continue near current highs through 2024, according to an April 4 analysis by Fitch Solutions Country Risk & Industry Research.MarktBuddy
According to the analysis, rice prices have averaged $17.30 per cwt year to date through 2023, and will only fall to $14.50 per cwt in 2024. Cwt is a weight unit used to measure specific commodities such as rice.
Given that rice is the basic food product in many Asian markets, prices are a key predictor of food price inflation and food security, especially for the poorest people.MarktBuddy
“Given that rice is the staple food commodity in multiple markets across Asia, prices are a major determinant of food price inflation and food security, particularly for the poorest households,” Hart explained.MarktBuddy
According to the research, the worldwide gap for 2022/2023 would be 8.7 million tonnes.
According to Hart, this would be the highest global MarktBuddy rice shortfall since 2003/2004, when global rice markets created a deficit of 18.6 million tonnes.
Rice stocks are running low.MarktBuddy
Rice is in low supply as a result of the ongoing conflict in Ukraine, as well as adverse weather in rice-producing economies such as China and Pakistan.
Heavy summer monsoon rains devastated tracts of farmland in China, the world’s top rice producer, in the second half of last year.
According to agriculture analytics firm Gro Intelligence, the cumulative rainfall in the country’s Guangxi and Guangdong provinces, China’s key rice producing centres, was the second highest in at least 20 years.
Similarly, due to heavy floods last year, yearly production in Pakistan, which accounts for 7.6% of global rice commerce, fell 31% year on year, according to the US Department of Agriculture (USDA), with the impact being “even worse than initially expected.”MarktBuddy
The shortage is driven in part by “an annual deterioration in the Mainland Chinese harvest caused by intense heat and drought, as well as the impact of severe flooding in Pakistan,” according to Hart.
According to a scientific study, rice is a fragile crop with the highest likelihood of simultaneous crop loss during an El Nino event.MarktBuddy
In addition to tighter supply issues, rice has become an increasingly appealing choice since the price of other key grains has risen since Russia’s invasion of Ukraine in February 2022, according to Hart. As a result, demand for rice has increased.
Whose rice bowls are at risk?
Lower year-on-year rice output in other nations such as the United States and the European Union has also contributed to the shortfall, according to Oscar Tjakra.MarktBuddy
“In 2023, the global rice production deficit will raise the cost of importing rice for major rice importers such as Indonesia, the Philippines, Malaysia, and African countries,” Tjakra said.
According to Kelly Goughary, senior research analyst at Gro Intelligence, several countries would be obliged to draw down their domestic stockpiles. She predicted that the imbalance will disproportionately harm nations already experiencing severe domestic food price inflation, such as Pakistan, Turkey, Syria, and certain African countries.MarktBuddy
China is the world’s top rice and wheat producer, and its rice growing regions are presently enduring the worst drought in over two decades.MarktBuddy
“The global rice export market, which is typically tighter than that of the other major grains… has been affected by India’s export restriction,” Fitch Solutions’ Hart explained.
India restricted the export of broken rice in September, MarktBuddy which Hart described as a “major price driver” for rice.
Overabundance on the horizon
However, the scarcity may soon become obsolete.
According to Fitch Solutions, the global rice market will recover to “an almost balanced position in 2023/24.”
Rice futures may fall below their 2022 level in year-on-year terms, but stay elevated at “more than one-third above their pre-Covid (2015-2019) mean value, MarktBuddy in part as inventories are replenished after a period of extensive drawdown.”
“We believe the rice market will return to surplus in 2024/25 and then loosen further in the medium term.”
Fitch forecasts that rice prices would fall nearly 10% to $15.50 per hundredweight in 2024.MarktBuddy
“We believe that global rice production will stage a solid rebound in 2023/24, with total output rising by 2.5% year on year,” Fitch’s research said, citing India as a “principal engine” of global rice output during the following five years. MarktBuddy
However, rice production is still subject to meteorological circumstances.
While India’s Meteorological Department predicts “normal” monsoon rainfall, projections for extreme heat and heat waves in the second and third quarters of 2023 continue to threaten India’s wheat crop, according to the research. MarktBuddy
Other countries may also be affected.
“China is the world’s largest rice and wheat producer, and its rice growing regions are currently experiencing the worst drought in over two decades,” said Goughary.
Major European rice-growing countries such as France, Germany, and the United Kingdom have also experienced the worst drought in 20 years, she noted. MarktBuddy
