Food inflation: Rice under pressure, prices expected to boil over

12 Sep 2022 --- Severe disruptions in global rice suppliers combined with a soaring demand for the grain could break the fragile balance between supply and demand, leading to price increases and, once again, supercharging global food inflation.

India has moved to curb its broken variety of rice exports, together with a 20% levy on other rice types, which has pushed off-balance domestic and international suppliers of the commodity.

According to the All India Rice Exporters Association, some local traders are refusing to pay the export tax, leaving hundreds of thousands of tons of rice trapped in India’s ports.

With less rice leaving India, Asian and African countries are facing severe rice shortages.

Rice is a crucial element of the diet in these countries. India is the largest rice exporter, with a 40% share of the global trade of the commodity, with 60% of its exports going to Asia and Africa.

The FAO All Rice Price Index puts rice prices at 10.9% higher than August 2021.Thailand and Vietnam to feed the world
Indian rice is heavily subsidized by the nation’s government, however with the new 20% levy, rivaling nations are now prepared to compete in prices.

Vietnam and Thailand, the second and third biggest exporters, will see increased demand, but if the demand shifts too fast and is overblown, rice prices will soar in the two countries.

According to the Thai Rice Exports Association, it will cause rice prices to rally. Nevertheless, the body doesn’t think that Thailand will apply restrictions on exports.

The two countries have been trying to push global rice prices up for a while now, officially partnering last month to boost the commodity prices.

“If the situation continues, farmers will turn to growing other crops that generate higher income, leading to a decline in rice production with its greater impact on global supply of food,” says Le Minh Hoah, agriculture minister of Vietnam.

According to the Thailand government, the country exported 4.09 million tons of rice in the January-July period – up 54% from a year earlier. A favorable monsoon season has boosted rice production in the country.

Vietnam expects to reach 7 million metric tons of exported rice this year, a similar number to the Thailand one (7.5 million metric tons).

Iraq, South Africa, Yemen, Senegal, Benin and the Philippines are among the top importers of Thailand’s rice. Particularly, Iraq has boosted imports of rice coming from Thailand by 353.1% this year.

Drought weighs in
Severe drought in Europe has also affected Italy’s paddy fields (which produce 1.5 million tons of rice); with no water for irrigation, the Po river’s 4,000 rice farms will have severely diminished outputs.

Northern Italy has not had substantial rains since November 2021.

Italy supplies half of the EU rice, mostly coming from Northern Italy. Its main importers are Mediterranean countries and Eastern Europe.

“The drought is devastating the Italian rice fields with estimated losses of over 30% of the harvest at a time when the record increase in production costs caused by the war in Ukraine has already cut sowing by ten thousand hectares nationwide,” according to Italian farmers association Coldiretti.

FAO August rice prices stableIndia is the world’s largest rice exporter.
The FAO All Rice Price Index puts rice prices at 10.9% higher than last August; coincidentally, August 2021 marked a 50-month low for rice prices.

The organization flags that prices remained stable until August across all analyzed categories – indica, aromatic, japonica and glutinous.

However, FAO saw the first signs that led to India’s export ban.

“In India, where Kharif planting made considerable inroads in narrowing lags caused by uneven rains during the month, the tendency for prices to strengthen was confined to the parboiled segment. In this market, prices drew support from signs of an intensification of purchases by Bangladesh.”

Kharif planting refers to the June to October rice planting season (representing 80% of India’s production), which has seen both droughts and floods.

Bangladesh will import 1.2 million metric tons of rice in the next few months.

India’s strong farming output might be attracting too many eyes, as even North Korea is asking for aid from the country after the monsoon destroyed the country’s crops. India is already providing humanitarian aid to Sri Lanka after the country’s government collapsed this July.

Pakistan deep trouble
In a cataclysmic monsoon, the Sindh province of Pakistan – producer of a third of the country’s food – has received six times its 30-year average rainfall during this monsoon season, ravaging over half of the province’s crops, according to FAO.

“The Pakistani people are facing a monsoon on steroids, the relentless impact of epochal levels of rain and flooding,” says UN Secretary-General Antonio Guterres.

With the unprecedented floods, farmers have lost most of the seeds for the next planting season starting in October.

Pakistan is the fourth largest rice exporter in the world, producing seven million metric tons of rice and exporting four million. However, if floods don’t recede, the October-December winter crop might be lost.

By Marc Cervera

To contact our editorial team please email us at editorial@cnsmedia.com