By India Today Business Desk: Several countries in Asia and Africa could soon face a critical shortage of rice as prices continue to surge across the globe.
Rice prices are already at an 11-year high and news agency Reuters reported that they are set to rally further after India’s move to increase the minimum support price (MSP) for the crop. The impact of El Nino on rainfall has further complicated the situation.
India accounts for more than 40 per cent of the world’s rice exports, but any reduction in shipment could drive up prices that have already been impacted by the Russia-Ukraine conflict and erratic weather conditions.
India’s role in global rice price
BV Krishna Rao, president of the Rice Exporters Association (REA) told the news agency that India was the cheapest supplier of rice.
“As Indian prices moved up because of the new minimum support price, other suppliers also started raising prices,” he said.
The report noted that the price of Indian rice exports has jumped to a five-year high of 9 per cent, following an MSP hike of 7 per cent. It is worth noting that export prices in Thailand and Vietnam have risen to more than two-year highs since the MSP hike.
Industry officials have also warned that the supply situation is extremely tight, and any decrease in Indian rice exports has the potential to cause a surge in global prices.
The price surge also poses challenges in building up stockpiles.
While demand from price-sensitive African countries has slowed, some Asian buyers, including Indonesia and the Philippines, have been increasing their purchases from traditional suppliers such as Vietnam.
Indonesia recently signed an uncommon agreement with India to import 1 million tons in the event of El Nino disrupting domestic supply.
El Nino impact
Rice, a staple for more than 3 billion people, predominantly originates from Asia, where the El Nino weather pattern often results in lower rainfall. However, even before the potential production disruptions caused by El Nino, the global rice price index remains above an 11-year high.
Despite near-record output forecasts from major producers such as Bangladesh, China, India, Indonesia, Thailand, and Vietnam, some global trading houses anticipate the impact of El Nino on the output of all key rice-producing countries.
Global rice inventories are projected to decline to a six-year low by the end of 2023/24, as stocks fall in China and India, following rising demand in recent years.
If yields drop sharply due to El Nino, the price could rise by a fifth or more, reported Reuters. The second rice crop in most Asian nations is expected to be lower than normal due to the weather phenomenon.
Thailand, the second-largest exporter of rice, has already urged farmers to plant only one rice crop due to below-normal rainfall. Similarly, India has experienced a slow start to planting with reduced rain, raising concerns for the ruling Bharatiya Janata Party (BJP) as elections approach next year.
The rice market, once a buyers’ market, is now on the verge of becoming a sellers’ market if El Nino adversely affects production, according to a Singapore-based deal quoted in the Reuters report.
As the global rice industry navigates these dynamics, attention remains on India’s agricultural changes, weather patterns, and their impact on prices and supplies worldwide.