Rice prices are rising amid rising food inflation, export bans

Meals costs have been on the rise prior to now few months. And rice, a staple meals in a lot of Asia, may very well be subsequent, business watchers stated.

The costs of many meals, starting from wheat and different grains to meat and oils, have shot up. That is been pushed by a slew of things, together with the rising price of fertilizer and power prior to now yr in addition to the Russia-Ukraine battle.

Meals export bans or critical disruptions have included these from India (wheat), Ukraine (wheat, oats and sugar, amongst others) and Indonesia (palm oil).

Rice may very well be subsequent in line. The United Nations’ Meals and Agriculture Group Meals Worth Index already exhibits worldwide rice costs creeping up for the fifth straight month to achieve a 12-month excessive, based on the newest Could information printed final week.

To make certain, rice manufacturing remains to be bountiful, consultants stated. However rising wheat costs, and the widely increased prices of farming, would make rice costs price monitoring subsequent.

“We have to monitor rice costs going ahead, as a result of rising wheat costs may result in some substitution in the direction of rice, rising demand and reducing present shares,” stated Sonal Varma, chief economist at Japanese financial institution Nomura.

Protectionist measures “truly worsen worth pressures at a world stage for numerous causes,” she informed CNBC’s “Road Indicators Asia.” Feed and fertilizer prices for farming are already rising, and power costs are including to freight prices, she added.

“So there’s a threat that we see extra protectionism from international locations,” stated Varma.

Nonetheless, she maintained that dangers to rice are nonetheless low as world rice inventories are ample and harvests in India are anticipated to be good this summer season.

“Proper now, I shall be far more anxious by India slapping an export ban on rice within the coming weeks — as they have been occupied with after wheat and sugar,” David Laborde, senior analysis fellow on the Worldwide Meals Coverage Analysis Institute, informed CNBC.

India and China are the world’s prime two producers of rice, accounting for greater than half of the worldwide complete, based on the World Financial Discussion board. Vietnam is the fifth-largest, whereas Thailand is in sixth place.

India imposed export bans on wheat in Could, citing a necessity “to handle the general meals safety of the nation.” It additionally slapped restrictions on sugar simply days after the wheat ban.

Laborde stated {that a} worth improve could be far preferable to any export ban.

“We should always actually differentiate between a worth rise that compensates for increased prices and can profit farmers (and assist them producing), than an export ban” that pushes costs up on world markets however pushes costs down on home markets, he stated.

Nafees Meah, regional consultant for South Asia on the Worldwide Rice Analysis Institute, added that power prices, which have been rising globally, are an enormous a part of rice manufacturing prices.

“So there’s an argument to say … if the market is indicating a rise in worth then why should not the farmers profit from elevated costs?” Nafees informed CNBC’s “Squawk Field Asia.”

However a rise in rice costs would badly have an effect on many in Asia, which is the most important client of the staple.

“So in within the Southeast Asia Pacific area, international locations like East Timor, Laos, Cambodia and naturally, locations like Indonesia, which [has a] very giant inhabitants, and lots of of whom are meals insecure shall be fairly badly affected if costs proceed to rise and keep at these very excessive ranges,” stated Nafees.

The U.N.’s meals worth index confirmed costs at the moment are 75% above pre-pandemic ranges, stated Frederique Provider, managing director and head of funding technique for RBC Wealth Administration.

“Pandemic-related labor shortages and Russia’s invasion of Ukraine have aggravated the scenario by each curbing meals provide and pushing up power costs even additional,” she wrote in a June report.

A few third of meals manufacturing prices are energy-related, Provider stated. Fertilizer specifically may be very energy-intensive to provide and costs have soared since final yr.