Global rice shortage is set to be the biggest in 20 years

From China to the U.S. to the European Union, rice production is falling and driving up prices for more than 3.5 billion people across the globe, particularly in Asia-Pacific – which consumes 90% of the world’s rice.

The global rice market is set to log its largest shortfall in two decades in 2023, according to Fitch Solutions.

And a deficit of this magnitude for one of the world’s most cultivated grains will hurt major importers, analysts told CNBC.

“At the global level, the most evident impact of the global rice deficit has been, and still is, decade-high rice prices,” Fitch Solutions’ commodities analyst Charles Hart said.

Rice prices are expected to remain notched around current highs until 2024, stated a report by Fitch Solutions Country Risk & Industry Research dated April 4.

The price of rice averaged $17.30 per cwt through 2023 year-to-date, and will only ease to $14.50 per cwt in 2024, according to the report. Cwt is a unit of measurement for certain commodities such as rice.

“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 for the poorest households,” Hart said.

The global shortfall for 2022/2023 would come in at 8.7 million tonnes, the report forecast.

That would mar the largest global rice deficit since 2003/2004, when the global rice markets generated a deficit of 18.6 million tonnes, said Hart.

Rice is a vulnerable crop, and has the highest probability of simultaneous crop loss during an El Nino event, according to a scientific study.

In addition to tighter supply challenges, rice became an increasingly attractive alternative following the surge in price of other major grains since Russia’s invasion of Ukraine in February 2022, Hart added. The resulting rice substitution has driven up demand.

India banned exports of broken rice in September, a move Hart said has been a “major price driver” for rice. 

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, the report cautioned.

Other countries may not be spared either.

“China is the largest rice and wheat producer in the world and is currently experiencing the highest level of drought in its rice growing regions in over two decades,” said Goughary.

Major European rice-growing countries like France, Germany and the UK have also been afflicted with the highest level of drought in 20 years, she added.