The prices of rice, a staple food grain consumed by over 3 billion people, are currently at an 11-year high, despite the forecast of a near-record output by the top six global rice producers. India, the largest exporter of rice, accounting for 40% of the world’s exports, is set to increase payments to its farmers. This has led to a 9% surge in the price of Indian rice exports, reaching a five-year high. The global rice price index remains high due to low inventories, which could be further impacted by the El Nino weather pattern and geopolitical factors such as Russia’s invasion of Ukraine.
B.V. Krishna Rao, president of the Rice Exporters Association, explained that as Indian prices rose due to the new minimum support price, other suppliers followed suit by increasing their prices. The El Nino weather phenomenon affects rice output in multiple countries, and some trading houses anticipate it will hamper the production of key rice producers, leading to a potential rally in prices. Global rice inventories are projected to reach a six-year low by the end of 2023–2024, driven by declining stocks in China and India.
If El Nino causes yields to sharply decrease, rice prices could rise by a fifth or more. Some Asian nations have already experienced lower-than-normal rainfall, affecting the second rice crop. Concerns over food inflation have led to restrictions on wheat, rice, and sugar exports in India. As elections approach, the slow start of rice planting and rising domestic prices pose challenges for Prime Minister Narendra Modi’s party.
Potential restrictions on Indian rice exports could strain global supplies, leaving other countries struggling to meet demand. Myanmar, Pakistan, Thailand, and Vietnam may attempt to increase their exports by 3–4 million metric tons to compensate. Price-sensitive African countries have reduced their demand, while some Asian buyers like Indonesia and the Philippines are increasing their purchases from traditional suppliers in Vietnam.
Last month, Indonesia made an agreement with India to import 1 million tons of rice in the event of El Nino disrupting domestic supply. This move is uncommon since Indonesia typically purchases rice from neighbouring Thailand and Vietnam. The Singapore-based dealer mentioned that while rice has been a buyers’ market in recent years, it could transition into a sellers’ market if El Nino impacts production.