Asian Rice Prices Soar 20% in May Amid War and Weather-Related Output Concerns

Asian Rice Prices Surge to Two-Decade High in May

Asian rice prices experienced their largest monthly increase in nearly two decades in May, with the trend likely to continue due to looming weather risks and surging energy and fertilizer costs. The Thailand white rice benchmark, a key Asian rice price indicator, surged 20% in May, its largest monthly gain in data going back to 2008. Concurrently, rice futures on the Chicago Board of Trade jumped 15% this month.

Commodities analysts predict that prices will continue to trend higher, as an expected El Niño event poses further upside. The El Niño phenomenon can bring hotter, drier weather to parts of Asia, exacerbating the impact of disrupted fuel and fertilizer supplies. These disruptions, caused by the near-closure of the Strait of Hormuz, are already weighing on rice production in import-reliant Asia. Rice is a critical crop for the region's economies, with countries such as Thailand, Vietnam, and India serving as major suppliers both domestically and abroad.

As the main crop season gets underway in many parts of Asia, some farmers are being forced to skip or delay planting the staple crop due to high input costs. In the southern Vietnamese province of Vinh Long, 60-year-old farmer Tran Van Be Bay plans to skip one round of planting this year due to the surge in fertilizer prices. Bay noted that applying more fertilizer not only increases costs but also harms the plants, given the hot weather conditions.

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Rice is a fertilizer-intensive grain, and the irrigation pumps used to flood fields often rely on diesel. As a result, prices of nitrogen fertilizers in Thailand, Cambodia, and the Philippines have surged by approximately 40-50% since the start of the war in February, according to the International Rice Research Institute. While countries had sufficient reserves in the March-May period, shortages could emerge unless the fertilizer trade normalizes, as stated by Alisher Mirzabaev, senior scientist for policy analysis and climate change at the institute.

Any reductions in Asia's rice output could impact global supply. The Philippines has already warned that a strong El Niño could slash paddy rice production by as much as 700,000 tons, or 3.5% of the annual production target. However, price gains could be capped on the international markets due to ample rice stocks, particularly in major producer India, and relatively weak global demand, as noted by Peter Clubb, market analyst at the International Grains Council.