Global Rice Supplies Steady but Faces Exposure to Potential Dry Weather Risks
According to a senior executive at commodity trader Louis Dreyfus Co., global rice supplies have steadied following last year’s surge. However, the market may face possible challenges due to the dry weather induced by El Niño.
Rice prices climb to their highest last year following an export ban by India, the world’s biggest rice shipper. In recent weeks, however, rice prices in key Asian hubs have eased.
“It does seem like we went through a very tight situation. You had the export ban in India and Indonesia came to buy a very large volume of rice,” Rubens Marques, LDC’s chief executive for South and Southeast Asia, said in an interview. “The combination of these two factors, I think, was too much for the market to handle, which ended up pushing prices up. It does seem like the supply and prices have stabilized,” he added.
Marques said rice supplies remain vulnerable to adverse weather. “We cannot deny that climate change has had an impact and may still have an impact in terms of having this El Nino and having drier than expected weather,” he said.
The El Niño phenomenon is a warming of the Pacific Ocean waters along the equator off the coast of South America. This weather pattern typically causes hot, dry weather in Asia, impacting vast numbers of rice-growing regions. “We need to keep an eye on the levels of reservoirs in some of the key producing countries. In May, June, we should know a bit more about what is going to happen with the irrigated crops,” he said.
“I think the biggest thing about El Niño, and it’s not talked enough about, is the unpredictability of weather events. The weather has always been there but it now how unpredictable it has become and how difficult it has become for the trade to basically solve those imbalances,” Marques stated.
Last year’s price rally led to lower rice demand from some countries. Marques mentioned, “You have to keep in mind that a lot of the rice in India ends up in Africa, which is a very price-sensitive market. And on the way up, I think the market has done its job of rationing demand.”
India’s export prices fell to their lowest in over three months last week on subdued demand and ample supplies, while Thailand’s prices remained largely flat.
