Global rice prices soar to highest since 2008 amid drought in Asia

By August 9, world rice prices rose to a maximum in almost 15 years. According to the Thailand Rice Exporters Association, Thai white rice, the benchmark for exporters in Asia, jumped to $648 per 1 ton on Wednesday, which is almost 50% more than in August last year. Rice provides the basic food for 3 billion of the world’s 7.8 billion people, mostly in Asia.

Rice prices have skyrocketed since July after the United Nations World Meteorological Organization announced that El Niño, a phenomenon of global temperature fluctuations in the upper layers of the ocean that causes droughts, has resumed after a seven-year pause. According to the organization’s forecasts, the phenomenon will last at least until the end of 2023. An additional factor that increased the price of rice was India’s decision on July 20 to ban the export of 80% of rice (except for Basmati) to curb domestic prices. India provided 40.5% of global rice exports in the 2022/23 agricultural year (begins in June), according to the US Department of Agriculture. It exports culture to 100 countries of the world.

On July 29, the UAE Ministry of Economy announced a temporary suspension – for four months – of exports and re-exports of all varieties of rice “in order to ensure sufficient supply in the domestic market.” On the same day, the Russian government imposed a temporary ban on rice exports until December 31, 2023. Thailand, the world’s second largest rice exporter (15.3%, according to the US Department of Agriculture), has not yet announced restrictions. But on August 5, the country’s authorities urged farmers to reduce its crops due to reduced rainfall – they are 40% below the norm this season. Rice is a moisture-loving crop: for each kilogram grown, an average of 2500 liters of water is required.

These negative factors are taken into account in the July 4 report of the UN Food Organization (UN) published on August 4. Rice prices, according to the document, made a big contribution to the growth of the overall food price index: in July, its value was 123.9 points, up 1.3% higher than last month. “The value of the PO price index for all types of rice increased by 2.8% compared to last month and by 19.7% compared to last year, reaching the highest level since September 2011,” the report says. The climate threat to the global rice crop is also mentioned in the report of the World Economic Forum, released on August 9. In addition to Asian countries, negative trends for the future harvest are noted in the California rice belt, where producers sowed 2 times less area before the 2022/23 agricultural year.

The climate became a serious risk factor for global rice production a couple of seasons ago, but export bans, especially Indian ones, are the key to rising prices, Eduard Zernin, chairman of the board of the Union of Grain Exporters, told Vedomosti. He recalled that back in 2022, India began to experience serious problems with the grain harvest and, as a result, introduced a ban on wheat exports, which is also valid this season.

“Now the situation is worse, the export ban does not save the situation – India is discussing the possibility of importing wheat to meet domestic demand,” says Zernin. “The scale of purchases varies from 5 million tons to 9 million tons. This is additional demand, which will definitely lead to a further increase in prices for wheat.”

At the same time, Vietnam, the world’s third largest exporter of rice (13.5%, according to the US Department of Agriculture), expects to take part of the Indian share of the world market as a result of favorable conditions, increasing crop production in the Mekong Delta. This was announced on August 1 by the director of the department of crop production of the Vietnamese Ministry of Agriculture Nguyen Nhu Cuong. Director General of the Institute for Agricultural Market Studies Dmitry Rylko believes that although Vietnamese farmers harvest two crops a year, they will not be able to quickly increase the harvest to take a significant share of India’s exports and influence prices on world markets.

According to Zernin, the already adopted export bans that influenced the rise in prices are largely reinsurance and a chain reaction. “The concern about the shortage of rice in the domestic market of these countries is more than serious,” Zernin notes. At the same time, rice and wheat are interchangeable crops in world markets. “Problems with rice are important for us only in terms of growth in demand for wheat. We, Russia, are provided with rice, we fixed the situation with food security by banning its export,” says Zernin.

The Russian authorities imposed restrictions on the export of rice in time to eliminate the temptation of Russian farmers to send it for export at more favorable world prices, thereby spurring domestic prices, Rylko concludes.