Rice prices hit 11-year high as Indian export ban fuels supply fears

International prices for rice and wheat have spiked to rare highs in recent weeks, driven by India’s ban on most rice exports and Russia’s ongoing war in Ukraine.

Bangkok rice traded at $607.50 a tonne on July 27, with the benchmark jumping by $62.50 in the week since India announced a ban on exports of non-basmati white rice July 20. Bangkok rice hit its highest price since May 2012.

India’s ministry of consumer affairs said it prohibited most rice exports to “lower the price as well as ensure availability in the domestic market.”

India led the world in rice exports for the 2022-23 growing season with 22.5 million tonnes, or 40% of the global total, the U.S. Department of Agriculture reports. Thailand ranked second, at 8.5 million tonnes.

El Nino conditions have returned for the first time in seven years, raising the risk of rice shortages. El Nino refers to the weather pattern in the equatorial region of the Pacific Ocean caused by higher sea surface temperatures. The effect could deplete rainfall in Southeast Asia, a major rice producing center.

Global rice inventories are expected to drop to 170.42 million tonnes at the end of the 2023-24 crop season, the lowest since the 2017-18 season, due to the anticipated decline in supply.

If future weather conditions prompt further downgrades to inventory projections, global rice prices could be pushed even higher as markets anticipate tighter supplies down the road.

Wheat prices are rising as well after Moscow abandoned an agreement last month that allowed exports of Ukrainian grain via the Black Sea. Russia also has intensified military attacks on Odesa, Ukraine’s largest port for grain exports.

Wheat futures on the Chicago Board of Trade, an international benchmark, exceeded $7.70 per bushel at one point in late July for the main September contract, marking the highest quote since late February.

Rice prices had remained relatively steady last year, mitigating the global food crisis as prices of wheat and other grains spiked after Russia invaded Ukraine. Supply concerns for rice, in addition to wheat, would eliminate an inexpensive option if a severe food shortage developed.

Prices of rice, wheat and other crops jumped during the “agflation” crisis of 2007-08. A return of agflation would most severely impact emerging nations in Africa and elsewhere that are poor and rely heavily on food imports.

In that scenario, such nations would lack enough foreign currency to import sufficient food, triggering inflation and causing more people to suffer from hunger.

Hunger afflicts 19.7% of people in Africa, according to this year’s The State of Food Security and Nutrition in the World report published by the United Nations and other organizations. This translates to roughly 281 million people, up by 77% from 2010. If these conditions worsen, it risks spreading political and societal turmoil across African nations.

These trends could affect Japan as well. Though the country is nearly self-sufficient in rice meant for meals, it relies on imported rice to produce processed food such as miso and rice crackers.

Japan’s government buys about 770,000 tonnes of rice yearly imported under a minimum-access quota system, and roughly 400,000 tonnes came from Thailand in fiscal 2022, Japan’s agricultural ministry reports. A higher cost for Bangkok rice could spill over to Japanese food prices.

Tags: exports, rice, wheat, India, ban, Эль-Ниньо, inventories, benchmark, international prices, non-basmati white rice