Asia rice prices surge 20% in May as war, weather threaten output

Asian rice prices posted their biggest monthly jump in nearly two decades in May, and could rally further as weather risks and war-driven surges in energy and fertiliser costs threaten production.

Thai white rice, an Asian benchmark, rallied 20 per cent in May, the most in a month in data going back to 2008. Rice futures on the Chicago Board of Trade also jumped 15 per cent in May. 

Prices will continue to trend higher, said Ms Bin Hui Ong, a commodities analyst at BMI, a unit of Fitch Solutions, which lifted its forecast for Chicago futures earlier in May.

An expected El Nino event – which can bring hotter, drier weather to parts of Asia – presents further upside, she added.

With fuel and fertiliser supplies still disrupted due to the near-closure of the Strait of Hormuz, farmers across import-reliant Asia are bracing themselves for the high input costs to start weighing on rice production – a key cornerstone of the region’s economies.

The crop is critical to the region’s food security and countries, including Thailand, Vietnam and India, are also major suppliers abroad. 

As planting for the main crop season gets under way in many parts, some farmers have been forced to skip or delay sowing the staple crop. 

Mr Tran Van Be Bay, a 60-year-old farmer in the southern Vietnamese province of Vinh Long, used to plant three crops a year.

But as fertiliser prices surge, he plans to skip one round this time. 

“With costs rising and weather this hot, it’s not a good time to sow a new crop,” he said.

“Applying more fertiliser not only costs more but also harms the plants.”

Rice is known for being a fertiliser-intensive grain and the irrigation pumps used to flood fields often run on diesel.

Prices of nitrogen fertilisers in Thailand, Cambodia and the Philippines have surged by 40 to 50 per cent since the start of the war in February, according to the International Rice Research Institute.

Though countries had enough reserves in the March to May period, shortages could emerge soon unless the fertiliser trade normalises, said Dr Alisher Mirzabaev, senior scientist for policy analysis and climate change at the institute. 

Any reductions in Asia’s output are likely to impact global supply.

The Philippines has already warned that a strong El Nino could slash padi rice production by as much as 700 million kg or 3.5 per cent of the annual production target.

Still, price gains could be capped on the international markets thanks to ample rice stocks, particularly in major producer India, and relatively weak global demand, said Mr Peter Clubb, market analyst at International Grains Council. BLOOMBERG