Rice faces squeeze on higher fertilizer costs and booming demand
Rice production is under threat in parts of Asia from higher fertilizer costs at a time when demand is increasing, posing a potential risk to food security and efforts to contain inflation.
Crop yields may decline in Thailand, the world’s second-largest exporter, because of elevated prices for crop nutrients, according to a research unit of Kasikornbank Pcl, while in the Philippines, the No. 2 importing country, a lower harvest is likely to increase the need for overseas purchases. China’s worried about the crop impact of pests, while India’s output depends on a good monsoon.
Most of the world’s rice is grown and eaten in Asia, making it vital for political and economic stability in the region. In contrast to the surge in wheat and corn prices after Russia’s invasion of Ukraine, rice has been subdued, but there is no guarantee it will remain so. Back in 2008, prices soared above $1,000 a ton, more than double the level now, amid a panic over supplies.
While wheat, corn and cooking oils have surrendered much of this year’s gains because of an improved outlook for supplies, farm production is clearly dependent ultimately on the weather, which is becoming more erratic as a result of climate change. Any fresh surge in wheat and corn costs will inevitably reignite demand for rice for food and livestock feed.
Much is riding on the rice crop in India, which ships about 40% of the world’s exports of the staple. “Global supply is at risk, but for now we still have massive Indian availability that is reining in prices,” said V. Subramanian, vice president at The Rice Trader, a researcher and conference organizer.India has already limited wheat exports, which the world was counting on to ease tight supplies, saying its food security was under threat. There’s concern that rice may be next on the list, though the prospects for that depend on the monsoon rains and harvest this season. So far the monsoon is progressing normally.
For now, India’s rice exports are helping to ease any supply tightness in the region. The Kasikorn Research Center in Thailand said record fertilizer prices after Russia’s invasion of Ukraine were a turning point for farmers in the country, and that lower application of crop nutrients will cut yields at a time of rising overseas demand.
The Philippines expects its rice harvest to drop this year because of more expensive fertilizer. The government is also worried about soaring food inflation, including the cost of rice, especially for lower-income households who spend about 16% of their budget on the staple grain.
China, the largest rice grower, has warned of a higher incidence of pests and diseases in its crop this year, with some provinces reporting an almost 10% increase in the area affected. Vietnam, a top shipper, said high freight and production costs are challenges, even as exports rose in the first half.
“Looking at the current situation, India is acting as an anchor for prices with its large exports,” said The Rice Trader’s Subramanian.