Global Rice Prices Could Soar Higher Due to Floods in China

Fitch Ratings revealed in a recent report that global rice markets could come under more strain as China, the world’s leading rice producer, deals with heavy rain and flood risks. “Heavy rain in China’s grain-producing north-eastern region that will reduce yields is likely to put upward pressure on already high global rice prices,” the firm stated in the report.

Flood alert levels were raised in the three provinces that account for 23% of China’s rice output: Inner Mongolia, Jilin, and Heilongjiang.

China has been inundated by devastating floods caused by Typhoon Doksuri. It was one of the worst storms to hit northern China in years, with the capital Beijing battered by the heaviest rainfall in 140 years.

In the report, Fitch pointed out that numerous key grain production areas in the three provinces were affected by heavy rains and remnants of Typhoon Doksuri. They are set to be overrun by Typhoon Khanun as it moves north.

While the full extent of the damage is not yet clear, Fitch’s report states that the resulting soaked grains will reduce the crop yields for the year. “This will lift China’s domestic grain prices and likely drive higher imports in 2H23 to partially offset the potential yield loss. The country may need to look to import more rice if its own harvests fall short, and that could drive global rice prices even higher,” the report stated.

The Food and Agriculture Organization All Rice Price Index recently revealed that global rice prices have surged to their highest in close to 12 years. Other organizations and firms are estimating higher prices soon after India banned exports of non-basmati white rice and Thailand urged its farmers to plant less rice to save water due to low rainfall.

Aside from rice, the Fitch report also noted corn and soybean among the major crops grown in Inner Mongolia, Jilin, and Heilongjiang will also be impacted by flood risks. China is expected to import more of both grains this year.