Global rice scarcity is set to be the greatest in 20 years

From China to the U.S. to the European Union, rice production is falling and increasing rates for more than 3.5 billion individuals around the world, especially in Asia-Pacific– which takes in 90% of the world’s rice.

The worldwide rice market is set to log its biggest deficiency in twenty years in 2023, according to Fitch Solutions.

And a deficit of this magnitude for among the world’s most cultivated grains will harm significant importers, experts informed CNBC.

“At the global level, the most evident impact of the global rice deficit has been, and still is, decade-high rice prices,” Fitch Solutions’ products expert Charles Hart stated.

Rice rates are anticipated to stay notched around present highs up until 2024, mentioned a report by Fitch Solutions Country Risk & & Industry Research dated April 4.

The rate of rice balanced $1730 per cwt through 2023 year-to-date, and will just relieve to $1450 per cwt in 2024, according to the report. Cwt is a system of measurement for specific products such as rice.

“Given that rice is the staple food commodity across multiple markets in Asia, prices are a major determinant of food price inflation and food security, particularly for the poorest households,” Hart stated.

The worldwide deficiency for 2022/2023 would can be found in at 8.7 million tonnes, the report projection.

That would mark the biggest worldwide rice deficit given that 2003/2004, when the worldwide rice markets produced a deficit of 18.6 million tonnes, stated Hart.

The deficiency is partially due to result of “an annual deterioration in the Mainland Chinese harvest caused by intense heat and drought as well as the impact of severe flooding in Pakistan,” Hart mentioned.

Rice is a susceptible crop, and has the greatest possibility of synchronised crop loss throughout an El Nino occasion, according to a scientific study.

In addition to tighter supply challenges, rice became an increasingly attractive alternative following the surge in price of other major grains since Russia’s invasion of Ukraine in February 2022, Hart added. The resulting rice substitution has driven up demand.

Lower year-on-year rice production in other countries like the U.S. and EU have also contributed to the deficit, said Oscar Tjakra, senior analyst at global food and agriculture bank Rabobank.

“The global rice production deficit situation will increase the cost of importing rice for major rice importers such as Indonesia, Philippines, Malaysia and African countries in 2023,” said Tjakra.

Many countries will also be forced to draw down their domestic stockpiles, said Kelly Goughary, senior research analyst at Gro Intelligence. She said countries most affected by the deficit would be those already suffering from high domestic food price inflation such as Pakistan, Turkey, Syria and some African countries.

“The global rice export market, which is typically tighter than that of the other major grains … has been affected by India’s export restriction,” said Fitch Solutions’ Hart.

India banned exports of broken rice in September, a move Hart said has been a “major price driver” for rice. 

However, the shortage may soon be a thing of the past.

Fitch Solutions estimates that the global rice market will return to “an almost balanced position in 2023/24.”

That could lead to rice futures falling in year-on-year terms to below their 2022 level, but remain elevated at “more than one third above their pre-Covid (2015-2019) mean value, in part as inventories are replenished after a period of extensive drawdown.”

“We believe that the rice market will return to surplus in 2024/25 and then continue to loosen through the medium term.”

Fitch further projects that the prices of rice could drop almost 10% to $15.50 per hundredweight in 2024.

“It is our view that global rice production will stage a solid rebound in 2023/24, expecting total output to rise by 2.5% year on year,” Fitch’s report forecast, hinging on India being a “principal engine” of global rice output over the next five years. 

However, rice production remains at the mercy of weather conditions.

While India’s Meteorological Department expects the country to receive “normal” monsoon rainfall, projections for extreme heat and heat waves through the 2nd and 3rd quarters of 2023 continue to position a danger to India’s wheat harvest, the report warned.

Other nations might not be spared either.

“China is the largest rice and wheat producer in the world and is currently experiencing the highest level of drought in its rice growing regions in over two decades,” stated Goughary.

Major European rice-growing nations like France, Germany and the UK have actually likewise been affected with the greatest level of dry spell in 20 years, she included.