"SOS" signals are being sent by the global rice market as production of rice is decreasing, leading to higher prices for more than 3.5 billion consumers worldwide, especially in the Asia-Pacific region, which consumes 90% of the world's production. According to Fitch Solutions, the global rice market is expected to experience the largest shortage in the last two decades in 2023.
"On a global level, the most visible impact of the global rice shortage has been, and continues to be, high rice prices over the past decade," said Charles Hart, a commodity analyst at Fitch Solutions. Rice prices are expected to remain high until 2024, according to a Fitch Solutions Country Risk & Industry Research report.
The average price of rice was $17.30 per cwt (a unit of rice measurement, approximately 50 kilograms) until 2023 and is expected to decrease to only $14.50 per cwt in 2024. "Given that rice is the staple food product in many markets in Asia, prices are a significant determinant of food price inflation and food security, especially for poorer households," said Hart.
The global shortage for 2022-2023 is forecasted to be 8.7 million tonnes, according to the report. This is the largest rice shortage in 25 years and is due to climate change and water shortages affecting rice production in many regions, including China, India, Southeast Asia, and the United States.
As mentioned in the report, the shortage of rice is due to both the ongoing war in Ukraine for over a year and the prolonged inclement weather in China and Pakistan. In the second half of last year, cultivable lands in China, the world's largest rice producer, were hit by heavy summer rains and floods. Similarly, Pakistan, which represents 7.6% of the world's rice trade, saw its annual production plummet by 31% year-on-year due to severe floods last year.
At the same time, rice has become an increasingly attractive alternative as the prices of other major grains rose after Russia's invasion of Ukraine in February 2022, which increased demand.
"The global rice production deficit will increase the cost of rice imports for major rice importers such as Indonesia, the Philippines, Malaysia, and African countries in 2023," notes an analyst on CNBC.
Many countries will also be forced to deplete their domestic reserves, and the countries that will be most affected by the shortage will be those that are already suffering from high domestic food price inflation, such as Pakistan, Turkey, Syria, and some African countries.
However, the deficit in rice production is partly due to an annual worsening of the harvest this year and, as mentioned in the report, will soon belong to the past. Fitch Solutions estimates that the global rice market will return to a "nearly balanced position in 2023-24".
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