Global rice markets coming to the fore again… a climate repercussion

Fitch: Increasing pressure on already high global rice prices
Global rice markets coming to the fore again… a climate repercussion
Rice farmer- Image by Sasin Tipchai from Pixabay

Global rice markets are back in the fore again, this time not for political reasons but as a result of floods and heavy rains in China, the world’s largest rice producer.

China, the world’s second-largest economy, has been hit by devastating flooding in recent weeks. Typhoon Doksuri was one of the worst storms to hit northern China in years, with the capital Beijing hitting the heaviest rainfall in 140 years.

In a report published by Fitch and seen by Economy Middle East, the credit agency said: “Heavy rains in China’s grain-producing northeast region, which will reduce yields, are likely to put upward pressure on already high global rice prices.”

Read: Egypt’s grain silos receive $66 mn in EU, French funding

China is the world’s largest rice producer, and flood alert levels have been raised for three provinces that account for 23 percent of the country’s rice production: Inner Mongolia, Jilin and Heilongjiang.

The report also noted that several major grain-producing areas in those three provinces were affected by heavy rains and the remnants of Cyclone Doksuri, and are set to face “another flood as Cyclone Khanun moves north.”

Fitch said flood-hit grain fields would reduce crop yields for this year, although the full extent of the damage is not yet clear.

“This will lift China’s domestic grain prices and potentially lead to higher imports in the second quarter of 2023 to partially offset the potential loss of revenue,” she said, adding that the country may need to look to import more rice if its crops fail, and this could push global rice prices higher.

Global rice prices have risen to their highest levels in nearly 12 years, according to the Food and Agriculture Organization of the All Rice Price Index.

Other market watchers estimate future rice prices will rise after India banned exports of white non-basmati rice last month as the government looks to tackle rising domestic food prices. Thailand also urged farmers to grow less rice in an effort to save water as a result of lower rainfall.

In addition to rice, the Fitch report also cited corn and soybeans among the main crops grown in Inner Mongolia, Jilin and Heilongjiang, which will be affected by flood risks. China is expected to import more grain this year than last year.

Days ago, two trade sources told Reuters that initial estimates put about four to five million metric tons of maize, or about two percent of domestic production, being affected by the floods. The floods are also likely to cause a drop in rice production, according to the agency.

The UN Food Agency announced that rice prices had risen to their highest levels in nearly 12 years.

The FAO rice price index rose 2.8 percent in July to 129.7 points.

FAO data showed the figure rose 19.7 percent from a year ago, the highest nominal value since September 2011. The biggest price increases came from Thailand, the world’s second-largest rice exporter.

Oscar Tjakra, senior analyst at the World Food and Agriculture Bank Rabobank, told CNBC: “We are likely to see a rise in the FAO rice price index for August 2023 compared to July 2023.”

He added that the ban on the export of non-basmati white rice in India came at a time of declining seasonal stocks at major global suppliers of rice, especially in Asia.

Prices could rise further if other countries follow suit in implementing export restrictions.  Samarendu Mohanty, Asian regional director at the International Potato Centre, told CNBC: “Prices could rise significantly if importing countries try to stock up on rice for domestic food security, and exporting countries impose export restrictions.”

For more on logistics, click here.

Related Topics: