Rice prices in Asia have soared to their highest level in over two and a half years as importers stockpile large quantities of rice amid concerns that the El Niño phenomenon could lead to drought conditions and affect yield.
According to data from the Thai Rice Exporters Association, the price of the region's benchmark variety, Thai white rice, has increased by approximately 15% in the past four months, to $535 per ton. This is the highest level since the beginning of March 2021.
The World Meteorological Organization has reported that the El Niño phenomenon, which could cause drought conditions in Southeast Asia, has occurred in the tropical Pacific for the first time in seven years. Meanwhile, record-breaking global high temperatures for three consecutive days last week have intensified worries about the pace of climate change.
Although monsoon rains have provided some relief to rice fields in some regions of India, the largest rice exporting country, the threat of drought is looming over crops in Thailand, the second-largest exporter, which is expected to face widespread drought from the beginning of 2024. The government has requested farmers to plant only one crop this year.
Chookiat Ophaswongse, Honorary President of the Thai Rice Exporters Association, mentioned that the effects of the drought weather would become clearly evident around September and October with the arrival of the El Niño phenomenon. He added that stockpiling is expected to continue, given that the El Niño phenomenon appears set to persist into next year.
Importers have begun to significantly increase their inventories. Vietnam anticipates its rice exports this year will climb to approximately their highest levels in a decade, with substantial increases in rice exported to the Philippines, China, and Indonesia.
Jeremy Zwinger, founder and CEO of research firm The Rice Trader, suggested that substantial purchases from Indonesia and the Philippines have driven the market higher. However, Zwinger also indicated that market fatigue could reappear in the fourth quarter of this year or even next year unless political or weather factors change the market direction.
Zwinger further noted that the global supply of rice remains unusually vast. Despite global year-end stocks declining for two consecutive years, data from the U.S. Department of Agriculture shows they are still at a historic high.
