Impending Global Rice Shortage Is Expected To Be Worst In 20 Years
While the local grocery store shelves may not look like it yet, rice production is falling around the world. As a result, the cost is gradually increasing, especially in Asia-Pacific where 90% of the world’s rice is consumed. According to a Fitch Solutions study shared by CNBC, we’re approaching the worst rice shortage the world has seen in two decades. The study further details, “At the global level, the most evident impact of the global rice deficit has been, and still is, decade-high rice prices.”
Unfortunately, the current high price of rice is expected to remain the same until 2024. It now averages $17.30 per cwt (hundredweight), and will only decrease to $14.50 between now and then. Charles Hart, a commodities analyst that works for Fitch Solutions said, “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 the poorest households.”
It’s estimated that the shortfall for 2022/2023 would reach a staggering 8.7 million tons globally, making it the largest worldwide rice shortage since 2003/2004. There are several reasons for the rice shortage, with the war in Ukraine and poor weather conditions in rice-producing economies like China and Pakistan being two examples. Last year, China faced a heavy summer monsoon which brought rain and floods, ruining crops. To give an example, according to Gro Intelligence, of how much rain China received, two of the country’s major rice-producing hubs experienced their second highest rainfall in at least 20 years. Pakistan faced similar challenges, resulting in a 31% drop in annual production.
Rice production in the U.S. and EU has always decreased, contributing to the global deficit. Oscar Tjakra, a senior analyst at global food and agriculture bank Rabobank said, “The global rice productions deficit situation will increase the cost of importing rice for major rice importers such as Indonesia, Philippines, Malaysia, and African countries in 2023.” Countries that are barely managing through food price inflation will be most impacted.
That said, through the cloudy skies rays of light have begun to creep through. Fitch Solutions estimates the rice market will mostly balance out sometime next year. That means rice inflation will decrease, bringing it back into a more affordable range, yet still not lower than pre-COVID prices. “We believe that the rice market will return to surplus in 2024/25 and then continue to loosen through the medium term. It is our view that global rice production will stage a solid rebound in 2023/24, expecting total output to rise by 2.4% year on year,” Fitch expects.
Time and weather conditions will tell what the future of rice holds.
