Rice Prices Explained

The rice market supply and demand stabilized as the producing countries’ output met the global need.

India’s rice inventories surged to 29.7 million metric tons (nearly 3 times the government target) as the country imposed export curbs for the past 2 years to bump up its local supplies. As the new crop rolled in, the country’s state stockpiler raised storage concerns because of the bumper harvest. As a result, the government allowed exports of all grades except 100% broken rice.

Additionally, India removed its 10% export duty on parboiled rice, leading the West African rice market to adjust its local rice value. This resulted in a downward trend of parboiled rice prices as many importers hesitated to make significant purchases. 

On the other side of the world, Vietnam reported an improved harvest, totaling 7.8 million tons. Also, the country opened its new market in Canada.

Why are rice prices fluctuating?

1. Weather Conditions

Rice cultivation relies heavily on weather conditions. The top rice producers in the world are located in Asia which is mostly visited by strong typhoons from the Pacific, bringing excessive flood that damages rice crops.

This alone explains the changeable rice cost in the market as weather disturbances reduce optimal rice production.

2. Export Ban and Declining Output

While India temporarily lifted its export and import rice tax duties, the country is up for the rice quota as it looks to control its domestic inflation. Additionally, Thailand (the second-largest supplier) expects a production decline in 2025 due to the extreme weather temperatures and flooding that affected its rice fields.

Similarly, Indonesia struggles to maintain high yields as the country suffers drought. Thus, these countries’ low production will support the increasing rice prices.

3. Demand Growth

As the population increases, so does demand accelerate. Asia as the top rice producer also holds the most populous continent. The growing population stretches rice capacity limiting production and import which influences the rice cost in the market.

4. Production Cost

The increasing value of the rice seed, fertilizer, and labor shape rice yield making it one of the causal factors for its price.

5. Oil Prices

The rapid increase of oil prices in the global market drives energy costs for rice production as its production requires ample energy resources. Thus, the fluctuation of energy costs will likely affect rice prices.

Which variables impact the price of rice?

• Weather Conditions
• Export Bans
• Demand Growth
• Production Costs
• Oil Prices
• Global Economic Conditions
• Consumer Preferences

Where does rice come from?

Primarily domesticated and cultivated in the Yangtze River basin in China 15,000 to 8,200 years ago, rice spread across East Asia, the Americas, and Europe through migration and trade. 

Today, the world relies heavily on meals from the top rice producers such as China, India, Bangladesh, Indonesia, and Vietnam. There are 3 main types of rice:

1. Long-Grain Rice – This type of rice has a length that grows at least 3-5 times its width.  Popular long-grain varieties are basmati (from India and Pakistan) and jasmine (from Thailand). When cooked properly, this rice tastes fluffy, tender, and a bit clumpy.

2. Medium-Grain Rice – This rice is 2-3 times longer than its width.  When cooked, it releases more starch which creates a moist and creamy taste. Top examples of this rice are Italian rice varieties such as Arborio, Carnaroli, and Vialone Nano. 

3. Short-Grain Rice – Often called glutinous rice, the short-grain variety is round, chubby, and starchy. It’s sticky and best eaten with chopsticks. Popular examples of this variety are Japanese short-grain, Chinese black rice, and Spanish Bomba rice.

What is the future price of rice?

The rice season from the top producers varies according to their specific region, climate, and rice variety.

According to the Food and Agriculture Organization of the United Nations (FAO), the global price of rice is expected to increase by an average of 2.5% per year over the next decade. Thus, this means that the average price of rice in 2030 will be between $10 and $12 per bushel.

Several factors are behind this:

First, climate change will harm rice production as more extreme weather events become more common. Additionally, most of the rice producers come from Asia. These countries are top typhoon destinations which largely affects their crop yields.

Second, population growth and rising incomes are expected to drive up demand for rice. The demand for staple foods increases due to population growth, particularly in Asia and Africa. Additionally, health-conscious consumers are choosing whole grain and specialty rice variants, adding a profitable segmented market. 

Third, geopolitical tensions (Israel-Hamas and Ukraine-Russia) and the Red Sea attacks will frequently dampen the volatile supply market.

Overall, these compounding factors are the prime movers of rice prices.