As A Global Rice Shortage Approaches, Here Is What To Expect
A bowl of rice may soon get pricer thanks to a looming global shortage. According to the analysis by Fitch Solutions, the global market for rice is expected to hit its biggest shortage, CNBC reports. The rise in demand and decrease in rice production will result in the largest deficit seen in more than 20 years. In 2023 the average price of rice has spiked up to $17.30 per cwt or hundredweight.
The rice deficit will impact major rice importers resulting in an up-charge in cost. Over 90% of all rice production and consumption is in the Asia-Pacific region. About 510 million tons of rice are produced globally, according to Statista, making it the second-most-produced cereal in the world.
However, Fitch Solutions expects a shortfall of 8.7 million, CNBC reports. "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 tells CNBC.
Extreme weather contributed to lower rice production
Rice production has fallen around the world, in countries such as China, Pakistan, and the United States, contributing to the deficit. The latter has seen a drop in production year-to-year. The dwindling supply of rice is a result of multiple phenomena, including bad weather and the war in Ukraine, CNBC reports.
The current war in Ukraine has led to an increase in the cost of wheat, which has turned many people to rice. This has led to a greater demand for rice, and production could not keep up. Last year, seasonal floods and rain affected rice production in China and Pakistan, which are two major rice-producing countries. In 2022, western regions of China responsible for a significant amount of rice production were hit with heavy rain and flood. Other parts of China faced extreme heat and drought. Rice production in Pakistan was decimated due to flooding, according to a report by the U.S. Department of Agriculture.
The shortage won't last long
The rice shortage will most likely be felt globally, but certain countries will face the brunt of the shortage. Rice is the primary food item for more than half of the world's population, according to the USDA, especially in Asia, Sub-Saharan Africa, and South America. But, China, India, and Bangladesh are the three top consuming countries of rice and will thus feel the shortage the most. Recently to curb rising prices, India, which is responsible for 40% of all rice exports, banned the export of broken rice, CNBC reported in a separate article. The country also added a 20% export tax on other rice varieties.
While the world may face high prices amid the rice shortage, it won't last long, according to CNBC. It is predicted the global rice market will stabilize to an "almost balanced position" as early as sometime in 2023 and as late as 2024. The price of rice could drop almost 10% to $14.50 per hundredweight by next year.