Analysis – Global rice stocks at risk as severe weather hits top exporters

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SINGAPORE/MUMBAI: Bad weather at Asia’s major rice suppliers, including India’s largest exporter, threatens to cut production of the world’s most important staple foods and fuel food inflation that is already near record highs.

Rice has bucked the trend of rising food prices over the past two years amid massive harvests and large stocks at exporters, even as COVID-19, supply disruptions and more recently the Russia-Ukraine conflict made other grains more expensive.

But bad weather in Asian exporting countries, which account for about 90 percent of the world’s rice production, is likely to change the price trajectory, traders and analysts said.

“There is upside potential for rice prices with the possibility of production cuts in key exporting countries,” said Phin Ziebell, agribusiness economist at National Australia Bank.

“A rise in rice prices would add to the already significant challenges to food affordability in parts of the developing world,” Ziebell told Reuters.

Sudden rainfall in India’s grain belt, a heat wave in China, flooding in Bangladesh and quality degradation in Vietnam could reduce the yields of four of the world’s five largest rice producers, farmers, traders and analysts, Reuters said.

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“Rice has remained accessible even as overall food prices hit record levels earlier this year,” said Shirley Mustafa, an economist for the UN Food and Agriculture Organization.

“We are now witnessing weather-related setbacks in a number of key rice-producing countries, including India, China and Bangladesh, which could lead to lower production if conditions do not improve in the coming weeks,” Mustafa added.

World grain prices have risen in 2022 despite relatively flat rice prices: https://tmsnrt.rs/3d7kgiB

‘PRODUCTION DECREASE IS CERTAIN’

India’s major rice-producing states, Bihar, Jharkhand, West Bengal and Uttar Pradesh, have recorded rainfall deficits of as much as 45 percent in monsoons this season so far, data from the state-run weather department shows.

That has partly led to a 13 percent drop in rice plantings this year, which could result in a production drop of 10 million tons or about 8 percent from last year, said BV Krishna Rao, chairman of the All India Rice Exporters Association. .

The acreage under which rice is grown has also declined as some farmers have switched to legumes and oilseeds, Rao said.

India’s summer-sown rice accounts for more than 85 percent of annual production, which rose to a record 129.66 million tons in the harvest year to June 2022.

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“A production decline is certain, but the big question is how the government will respond,” said a Mumbai-based dealer at a global trading company.

India’s stocks of milled rice and paddy rice were 55 million tons on July 1, versus the target of 13.54 million tons.

That has kept rice prices low for the past year, along with India’s record 21.5 million tons shipment in 2021, which was more than the total shipped by the world’s next four largest exporters – Thailand, Vietnam, Pakistan and the United States.

“But the government is oversensitive to prices. A small increase could prompt it to impose export restrictions,” said the trader.

In Vietnam, rains during the harvest have affected grain quality.

“I’ve never seen it rain so much during the harvest. It’s just abnormal,” said Tran Cong Dang, a 50-year-old farmer in the Mekong Delta province of Bac Lieu.

“In just ten days, the total rainfall measured is about the same as all of last month,” said Dang, who estimated a 70 percent yield loss on his 2-acre paddy field due to flooding.

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IMPORTS, PRICES

China, the world’s largest rice consumer and importer, has suffered yield losses due to extreme heat in grain-growing areas and is expected to push imports to a record high of 6 million tons in 2022/23, the US Department of Agriculture said.

China imported 5.9 million tons a year ago.

The world’s third largest consumer, Bangladesh, is also expected to import more rice after flood damage in key producing regions, traders said.

The full extent of the deficits in countries other than India has yet to be estimated by analysts or government agencies who often do not publish output data until later in the year.

But the impact of unfriendly harvest weather can already be seen this week in the slight increase in export prices from India and Thailand.

“Rice prices are already close to the bottom and we are seeing the market rise from current levels,” said a Singapore-based trader at one of the world’s largest rice traders.

“Demand is picking up with buyers like the Philippines and others in Africa looking to book freight.”

Two-year price change in percent of the most important food products worldwide: https://tmsnrt.rs/3PWKL8F

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