According to a report by Fitch Solutions Country Risk & Research, the global rice market is set to record its largest shortfall for the first time in two decades. From China to the U.S. to the European Union, rice production is failing and driving up prices for more than 3.5 billion people across the globe, particularly in the Asia-Pacific region, which consumes 90% of the world’s rice.
Fitch Solutions predicts that the global shortfall for 2022/2023 would come in at 8.7 million tonnes. This marks the largest global rice deficit since 2003/2004 when the global rice markets generated a deficit of 18.6 million tonnes.
CNBC reported that globally, rice production is failing and driving up prices. According to them, the price of rice averaged USD 17.30 per cwt year-to-date and appears likely to ease to USD 14.50 per cwt next year. Charles Hart, Fitch Solutions’ commodities analyst told CNBC, “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.”
The shortage in rice supply is a result of the ongoing war in Ukraine, as well as weather issues in rice-producing economies like China, Pakistan, and India. In the second half of 2022, numerous farmlands in China were plagued by heavy summer monsoon rains and floods. Currently, China is experiencing its worst drought in two decades. On the other hand, Pakistan saw its annual rice production plunge by 31% due to severe flooding.
Recently, it was reported India and the rest of South Asia is experiencing a prolonged heatwave and delayed onset of monsoons. Moreover, India also banned exports of broken rice in September 2022, which Hart claims to have been a key driver of the prices.
Drought has also hit rice-growing countries in the U.K., France, and Germany.
Rice tends to be a vulnerable crop and in addition to tighter supply challenges, rice became an increasingly attractive alternative following the surge in the price of other major grains since Russia’s invasion of Ukraine in February 2022.
“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 Oscar Tjakra, senior analyst at global food and agriculture bank Rabobank.
There is still hope on the horizon, according to Fitch Solutions as they estimate that the global rice market should return to near normal in 2023-2024. That could lead to rice futures falling in year-on-year terms to below their 2022 level but remaining 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.”
Fitch Solutions projects that the prices of rice could drop almost 10% to $15.50 per hundredweight, in 2024.
While it may sound promising, rice production still remains at the whim of weather conditions. Countries like China, France, Germany, and the U.K. all have serious levels of drought to fight through before getting back to a semblance of normalcy.