Global rice shortage is set to be the biggest in 20 years
Rice production for 2023 is set to log its largest shortfall in two decades, according to Fitch Solutions.
“At the global level, the most evident impact of the global rice deficit has been, and still is, decade-high rice prices,” Fitch Solutions’ commodities analyst Charles Hart told CNBC.
There’s a strained supply of rice as a result of the ongoing war in Ukraine, as well as weather woes in rice-producing economies like China and Pakistan
From China to the U.S. to the European Union, rice production is falling and driving up prices for more than 3.5 billion people across the globe, particularly in Asia-Pacific – which consumes 90% of the world’s rice.
The global rice market is set to log its largest shortfall in two decades in 2023, according to Fitch Solutions.
And a deficit of this magnitude for one of the world’s most cultivated grains will hurt major importers, analysts told.
“At the global level, the most evident impact of the global rice deficit has been, and still is, decade-high rice prices,” Fitch Solutions’ commodities analyst Charles Hart said.
Rice prices are expected to remain notched around current highs until 2024, stated a report by Fitch Solutions Country Risk & Industry Research dated April 4.
The price of rice averaged $17.30 per cwt through 2023 year-to-date, and will only ease to $14.50 per cwt in 2024, according to the report. Cwt is a unit of measurement for certain commodities such as rice.
“Given that rice is the staple food commodity across multiple markets in Asia, prices are a major determinant of food price inflation and food security, particularly for the poorest households,” Hart said.
The global shortfall for 2022/2023 would come in at 8.7 million tonnes, the report forecast.
That would mark the largest global rice deficit since 2003/2004, when the global rice markets generated a deficit of 18.6 million tonnes, said Hart.
Strained rice supplies
There’s a short supply of rice as a result of the ongoing war in Ukraine, as well as bad weather in rice-producing economies like China and Pakistan.
In the second half of last year, swaths of farmland in the world’s largest rice producer China were plagued by heavy summer monsoon rains and floods.
The accumulated rainfall in the country’s Guangxi and Guangdong province, China’s major hubs of rice production, was the second highest in at least 20 years, according to agriculture analytics company Gro Intelligence.
Similarly, Pakistan — which represents 7.6% of global rice trade — saw annual production plunge 31% year-on-year due to severe flooding last year, said the U.S. Department of Agriculture (USDA), labeling the impact as “even worse than initially expected.”
The shortfall is partly due to result of “an annual deterioration in the Mainland Chinese harvest caused by intense heat and drought as well as the impact of severe flooding in Pakistan,” Hart pointed out.
Rice is a vulnerable crop, and has the highest probability of simultaneous crop loss during an El Nino event, according to a scientific study.
In addition to tighter supply challenges, rice became an increasingly attractive alternative following the surge in price of other major grains since Russia’s invasion of Ukraine in February 2022, Hart added. The resulting rice substitution has driven up demand.