Global Courant 2023-04-19 10:23:38
Bowl of white rice at Bamboo Sushi restaurant in San Ramon, California, January 23, 2022.
Gado | Archival Photos | Getty Images
From China to the US to the European Union, rice production is falling, driving up prices for more than 3.5 billion people around the world, particularly in Asia Pacific. which consumes 90% of the world’s rice.
According to Fitch Solutions, the global rice market will record its largest deficit in two decades in 2023.
And a shortage of this magnitude for one of the world’s most cultivated grains will hurt major importers, analysts told CNBC.
“At the global level, the most obvious impact of the global rice shortage has been and still is a decade of high rice prices,” said Fitch Solutions commodities analyst Charles Hart.
According to an April 4 Fitch Solutions Country Risk & Industry Research report, rice prices are expected to remain around current highs through 2024.
The price of rice averaged $17.30 per cwt through 2023 and will only fall to $14.50 per cwt in 2024, according to the report. Cwt is a unit of measurement for certain commodities such as rice.
As rice is the staple food in several markets in Asia, prices are an important determinant of food price inflation and food security, especially for the poorest households.
Karel Hart
commodity analyst, Fitch Solutions
“As rice is the staple food in multiple markets in Asia, prices are a major determinant of food price inflation and food security, especially for the poorest households,” Hart said.
The global deficit for 2022/2023 would reach 8.7 million tonnes, the report predicted.
That would be the largest global rice shortage since 2003/2004, when global rice markets generated a deficit of 18.6 million tons, Hart said.
Strained rice stocks
Workers cultivate rice seedlings at an agricultural gas station in Hangzhou, east China’s Zhejiang province, Sunday, April 16, 2023.
Future publication | Future publication | Getty Images
The shortage is partly due to “an annual deterioration in the harvest in mainland China, caused by intense heat and drought, as well as the effects of severe flooding in Pakistan,” explained Hart.
Rice is a fragile crop and has the greatest chance of simultaneous crop loss during an El Nino event. according to a scientific study.
In addition to tightening supply challenges, rice became an increasingly attractive alternative following the rise in prices of other major grains since the Russian invasion of Ukraine in February 2022, Hart added. The resulting rice replacement has boosted demand.
Whose rice bowls will be affected?
Lower year-on-year rice production in other countries such as the US and the EU have also contributed to the shortfall, said Oscar Tjakra, senior analyst at global food and agriculture bank Rabobank.
“The global shortage of rice production will increase the cost of importing rice for major rice importers such as Indonesia, the Philippines, Malaysia and African countries in 2023,” said Tjakra.
Many countries will also be forced to reduce domestic stockpiles, said Kelly Goughary, a senior research analyst at Gro Intelligence. She said the countries most affected by the deficit are those already suffering from high domestic food price inflation, such as Pakistan, Turkey, Syria and some African countries.
China is the largest rice and wheat producer in the world and is currently experiencing the worst drought in its rice-growing regions in more than two decades.
Kelly Goughary
senior research analyst, Gro Intelligence
“The global rice export market, which is typically tighter than the other major grains, has been hit by India’s export restrictions,” said Hart of Fitch Solutions.
Surplus on the horizon
However, the shortage could soon be a thing of the past.
Fitch Solutions estimates that the global rice market will return to “a near-balanced position in 2023/24”.
That could cause rice futures to fall year-on-year below 2022 levels, but remain high at “more than a third above their pre-Covid (2015-2019) average value, in part because stocks are being replenished after a period of extensive withdrawal. .”
“We believe the rice market will return to surplus in 2024/2025 and then continue to ease in the medium term.”
Fitch also expects rice prices to fall by nearly 10% to $15.50 per cent by 2024.
“It is our view that global rice production will rebound strongly in 2023/24, with total production expected to increase by 2.5% year-on-year,” predicts Fitch’s report, with India being a “key driver” of the global rice production over the years. the next five years.
A combine harvester mows through a field during a wheat harvest on a farm in Karnal, Haryana, India, on Thursday, April 13, 2023.
Anindito Mukherjee | Bloomberg | Getty Images
However, rice production remains dependent on weather conditions.
While the Meteorological Department of India expects the country to do so receive “normal” monsoon rainsForecasts for intense heat and heat waves in the second and third quarters of 2023 continue to threaten India’s wheat crop, the report warned.
Other countries should not be spared either.
“China is the largest rice and wheat producer in the world and is currently experiencing the highest drought in its rice-growing regions in more than 20 years,” said Goughary.
Major European rice-producing countries such as France, Germany and the UK are also experiencing the highest drought in 20 years, she added.
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