Rice production for 2023 is set to log its largest shortfall in two decades, according to Fitch Solutions. This severe global deficit is primarily driven by the ongoing war in Ukraine, and weather-related challenges in major rice-producing countries like China and Pakistan.

Over 3.5 billion people worldwide, particularly in Asia-Pacific, are feeling the impact of rising rice prices, as the region consumes 90% of the world’s rice. Fitch Solutions warns that rice prices will likely remain high until 2024, posing serious implications for food price inflation and food security for the poorest households.

The global shortfall for 2022/2023 is expected to reach 8.7 million tonnes, the largest deficit since 2003/2004, when the global rice market saw a deficit of 18.6 million tonnes. This significant deficit is primarily attributed to strained rice supplies, resulting from a combination of the ongoing war in Ukraine, heavy summer monsoon rains and floods in China, and severe flooding in Pakistan. Rice is a vulnerable crop, with the highest probability of simultaneous crop loss during an El Nino event.

Rice prices averaged $17.30 per cwt through 2023 year-to-date and are projected to ease to $14.50 per cwt in 2024. The global rice production deficit will increase import costs for major rice importers such as Indonesia, the Philippines, Malaysia, and African countries. Many countries will be forced to draw down their domestic stockpiles, with countries already experiencing high domestic food price inflation, like Pakistan, Turkey, Syria, and some African countries, being the most affected.

India’s export restriction on broken rice has also been a major price driver for rice. However, Fitch Solutions estimates that the global rice market will return to an almost balanced position in 2023/24, with rice futures potentially falling in year-on-year terms to below their 2022 level. Fitch further projects that the prices of rice could drop almost 10% to $15.50 per hundredweight in 2024.

Despite these projections, rice production remains at the mercy of weather conditions. While India’s Meteorological Department expects the country to receive “normal” monsoon rainfall, forecasts for intense heat and heat waves through the second and third quarters of 2023 continue to pose a threat to India’s wheat harvest. China, the world’s largest rice and wheat producer, is currently experiencing the highest level of drought in its rice-growing regions in over two decades. Major European rice-growing countries like France, Germany, and the UK have also been afflicted with the highest level of drought in 20 years.

References:

¹ Global rice shortage is set to be the biggest in 20 years – CNBC – April 18, 2023

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