Market analysts and some traders predict that off-season rice production from the world's two leading rice-exporting countries, India and Thailand, will decline in Q1 2024 due to drought conditions.

In 2023, the global rice market experienced significant volatility due to India's export restrictions, as it is the largest rice exporter in the world.

Moreover, climate change, particularly the complex El Niño weather phenomenon, has affected key rice-producing countries. High global rice prices and limited supply have become new threats to global food security.

Market Turbulence Following India's Ban

On July 20, India imposed a ban on the export of common white rice. This export ban was announced as rice prices in India had increased by more than 11.5% over the past year (up to the date of the ban).

Additionally, unfavorable weather conditions during the Spring-Summer rice season further pushed the Indian government towards this decision. The export ban is intended to boost domestic food supply and control inflation. India is the world's leading rice supplier with a 40% market share, followed by Thailand and Vietnam.

Although India continues to export parboiled rice and basmati rice under international commitments, global rice prices have surged by 15-25% since the ban was implemented, reaching the highest level in 15 years in August 2023.

The hardest hit are countries dependent on Indian white rice, such as Bangladesh and Nepal, as well as some African countries that typically use broken rice like Benin, Senegal, Togo, and Mali.

Many experts indicate that the rice shortage will lead to higher prices for other staple foods like wheat, soybeans, and corn.

As the market was still adjusting to the sharp price fluctuations following India's rice export ban, the country officially announced a 20% export tax on parboiled rice just one month later. This move further restricted rice exports and drove global rice prices up.

Activity Surge in the Final Quarter

In the latter half of September 2023, the global rice market "cooled down" with a decrease of up to $30-40/ton compared to the peak prices at the end of August and early September. However, as October approached, rice prices in Vietnam and Thailand increased again and showed no signs of stopping.

As of December 21, the price of Vietnamese 5% broken rice was quoted at $660-665/ton, the highest level since mid-July 2008 due to tight supply.

The price of Thai 5% broken rice has risen to the highest level since August 2023, at $646-650/ton.

The price of Indian 5% broken rice was quoted at $505-512/ton, the highest in two months. India's rice production is expected to decline this year for the first time in eight years, making it likely that the country will continue to restrict exports to keep prices low before the general election in 2024.

Meanwhile, rice consumption remains high in major importing countries. In the Philippines, after about a month of imposing a price ceiling to curb food price increases, President Ferdinand Marcos Jr. announced on October 4 that the rice price ceiling policy would be lifted. The removal of the rice price ceiling was also welcomed by local farmers as it encourages domestic production, especially during the ongoing harvest season.

According to experts and businesses, the removal of the rice price ceiling in the Philippines will likely revitalize the global market after a period of stagnation.

In the context of shrinking supply, the market before Christmas and Ramadan (the Islamic fasting month) will drive up rice demand in Asian countries. Many believe that China will soon return to the market and become one of the most active rice buyers.

After a period of stagnation in rice imports due to the dual impact of new rice import standards from ASEAN countries and a slow economic growth rate, China has ramped up rice imports in the latter part of this year, especially from Vietnam.

Not only Asian countries, but European countries have also seen a significant increase in rice import demand.

Outlook for 2024

According to the latest World Bank (WB) report on “Global Commodity Outlook,” global rice prices are expected to remain high until at least 2025, due to export restrictions from major producing countries and the threat posed by El Niño.

Global rice prices in 2023 are estimated to have increased by an average of over 28% compared to 2022 and are expected to rise by an additional 6% in 2024. This is due to the El Niño phenomenon, responses from major exporters and importers, and other factors.

According to a study from China, rice is the most vulnerable crop and has the highest risk of poor harvests during El Niño events. China is experiencing what could be the most severe drought in two decades in many rice-growing regions. In addition to these challenges, rice is also in short supply due to high demand, becoming an attractive alternative to other grains that are in short supply and experiencing significant price increases due to the Russia-Ukraine conflict.

According to Bloomberg, market analysts and some traders forecast that off-season rice production from India and Thailand will decline in Q1 2024 due to drought and low water levels in reservoirs. Meanwhile, rice farmers in Indonesia, a leading rice-importing country, are still grappling with drought.

To ensure the country's rice reserves, the Indonesian government has instructed the National Logistics Agency (Bulog) to import an additional 2 million tons of rice in 2024.

According to Bulog's Chairman and Director, Budi Waseso, the government will closely monitor local rice production conditions as well as weather conditions. If there is a forecasted rice shortage, Bulog will provide enough rice to compensate for the shortfall.

Source: Vietstock