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

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

Additionally, climate change, particularly the complex development of El Niño, has affected key rice-producing countries. Rising global rice prices and limited supply have become new threats to global food security.

Market Surge Following India's Ban

On July 20, India imposed a ban on the export of non-basmati white rice. The export ban came amid a more than 11.5% increase in domestic rice prices over the past year (as of the date the ban was announced).

Moreover, adverse weather conditions during the spring-summer rice season further prompted the Indian government to make this decision. The export ban is believed to be aimed at boosting domestic food supplies and controlling inflation. India is the world’s leading rice supplier with a 40% market share, followed by Thailand and Vietnam.

Although India continues to export basmati rice and parboiled rice under international commitments, global rice prices have surged by 15-25% since the ban, reaching a 15-year high in August 2023.

The greatest impact has been felt by countries reliant on Indian white rice, such as Bangladesh and Nepal, and several African countries that typically use broken rice, including Benin, Senegal, Togo, and Mali.

Many experts suggest 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 significant 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 contributed to the continued rise in global rice prices.

Active Market in the Last Quarter

In the second half of September 2023, the global rice market "cooled down" with prices decreasing by up to 30-40 USD/ton from the peak levels in late August and early September. However, as October approached, rice prices in Vietnam and Thailand began to rise again with no signs of stopping.

By December 21, the price of Vietnam’s 5% broken rice was quoted at 660-665 USD/ton, the highest level since mid-July 2008 due to scarce supply.

Thailand’s 5% broken rice prices increased to the highest level since August 2023, at 646-650 USD/ton.

India’s 5% broken parboiled rice was quoted at 505-512 USD/ton, the highest in two months. India's rice production is expected to decrease this year, marking the first drop in eight years, making it likely that the country will continue to restrict exports to keep prices low ahead of the general elections in 2024.

Meanwhile, rice consumption remains high in major importing countries. Specifically, in the Philippines, after about a month of price caps to curb food price increases, President Ferdinand Marcos Jr. announced on October 4 that the rice price cap policy would be lifted. This move is welcomed by local farmers as it encourages domestic production, especially during the ongoing harvest season.

Experts and businesses believe that lifting the rice price cap in the Philippines will help improve the global market after a period of subdued activity.

Amid shrinking supplies, the market before Christmas and Ramadan (the Islamic fasting month) will drive up demand for rice 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 stagnant rice imports due to new import standards from ASEAN countries and a slowing economy, China has increased its rice imports in the latter months of this year, especially from Vietnam.

Not only Asian countries, but rice import demand has also significantly increased in Europe.

Outlook for 2024

According to the latest "Global Commodity Outlook" report from the World Bank (WB), global rice prices are expected not to decrease significantly before 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 more than 28% compared to 2022 and are expected to rise by an additional 6% in 2024. This is due to the El Niño phenomenon, reactions from major exporters and importers...

According to a Chinese study, rice is the most vulnerable crop with the highest risk of crop failure during El Niño events. China is experiencing what could be the worst drought in two decades in many rice-growing regions. Besides the aforementioned challenges, rice is also in short supply due to high demand, as it becomes an attractive substitute for grains affected by shortages and price hikes due to the Russia-Ukraine conflict.

According to Bloomberg, market analysts and some traders forecast that off-season rice production from the two leading rice-exporting countries, India and Thailand, will decrease in Q1 2024 due to drought and low reservoir levels. Meanwhile, rice farmers in Indonesia, the leading rice-importing country, are still battling drought.

To ensure the country's rice reserves, the Indonesian government has instructed the State 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 and weather conditions. If a shortage is forecasted, Bulog will provide enough to compensate for the deficit.

Source: Vietstock