Rice Prices Explained
The soaring rice prices in the global market stem from export restrictions and dry Asian soil due to El Niño. Trading Economics recorded $17 per hundredweight rice futures because of the tight market supply.
Additionally, the World Bank predicted that rice prices will remain in 2024 as water from most Asian reservoirs hasn’t returned its normal levels. Thus, these limited water resources will further squeeze the commodity’s supply which translates to higher rice prices in the market.
Why are rice prices fluctuating?
Rice prices never fail to show volatility in the market as it is one of the staple foods globally. Here are the several factors of its value variation:
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 which bring 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 Bans
India’s rice export ban will continue until April or May 2024 ( the country’s scheduled general election ) as Prime Minister Modi looks to control the country’s domestic inflation. Additionally, Thailand ( the second-largest supplier ) expects a production decline in Q1 2024 due to the extreme weather.
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.
Third, geopolitical tensions ( Israel-Hamas and Ukraine-Russia ) and the Red Sea attacks will dampen the volatile supply market.
Overall, these compounding factors are the prime movers of rice prices.