World’s rice glut will be put to the test with El Niño’s return

By Napat Kongsawad, Bloomberg

The world is awash in rice with global stockpiles at close to record levels. El Niño’s arrival will put those reserves to the test.

The weather pattern usually brings hotter and drier conditions to Asia, which produces and consumes 90% of the global rice supply. Thailand, the world’s second-biggest exporter, has already asked farmers to reduce their planting because of lower rainfall.

Historically, rice yields have been lower during El Niño years, and in some cases, much less. Last week, the US announced the official arrival of the weather phenomenon, with a high chance of it exceeding moderate strength. The stronger the current cycle is, the more likely rice supplies will be affected.

“What we feel will happen this year is that the market will become a seller’s market,” said Chookiat Ophaswongse, honorary president of the Thai Rice Exporter’s Association, in an interview. “Not to the extent where there’s a shortage, but supply will definitely go down.”

The world’s stockpiles of rice are forecast to drop 5% to 173.5 million tons this season, according to the US Department of Agriculture.

Importers are starting to become wary, ramping up purchases in recent months. Vietnam, the world’s third-largest exporter, shipped 40% more rice to the Philippines in the first four months of 2023 compared with a year ago. Exports to China surged more than 70%, and to Indonesia by almost 2,500%, according to Vietnam’s Customs Department.

Numbers from Thailand paint a similar picture with rice exports increasing over 18%, according to the Thai Commerce Ministry.

The outlook for the rice crop in India, the world’s top exporter, is highly dependent on the southwest monsoon. Rainfall is forecast to be normal this year, which will likely support production. However, El Niño has historically led to deficient rainfall in India, adversely affecting agricultural output and driving up food prices.

Even with the onset of El Niño, overall rice harvests this year are forecast to remain steady, at 512.5 million metric tons. according to the USDA. Rising demand is responsible for the expected drop in stocks.

“There is no rice shortage today,” said Jeremy Zwinger, founder and chief executive officer of agricultural research firm The Rice Trader. “If anything, there is a massive rice surplus and fears that the crops, which look good, may face some issue from weather.”

It’s important for countries to maintain healthy strategic stocks, Zwinger said. “Vietnam must be careful as they are exporting rather aggressively as well, and stocks are a bit tight.”

This article has been republished from The Economic Times