Rice fields on a spider’s web in Flores, Indonesia. The Food and Agriculture Organization of the United Nations (FAO) Food Price Index shows international rice prices crawling for the fifth consecutive month, hitting a 12-month high, according to the latest May data published last week.
Tanotkage and Engstage
Food prices have been on the rise in the past few months. And industry watchers said rice, a staple food in much of Asia, could be next.
Prices of many foods have risen, from wheat and other grains to meat and oils. This was driven by a number of factors, including the high cost of fertilizer and energy in the past year as well as the Russo-Ukrainian war.
Food export bans or serious disruptions included those from India (wheat), Ukraine (wheat, oats, sugar, etc.) and Indonesia (palm oil).
Rice could be next in line. The Food and Agriculture Organization of the United Nations Food Price Index is already showing international rice prices Crawling for the fifth consecutive month to reach a 12-month highAccording to the latest May data published last week.
To be sure, rice production is still plentiful, experts say. But higher wheat prices, and higher farming costs in general, will make rice prices worth pursuing next.
So there is an argument to be made…if the market is indicating an increase in price why shouldn’t farmers benefit from higher prices?
precious meh
International Rice Research Institute
“We need to monitor rice prices in the future, because higher wheat prices may lead to some substitution of rice, increase demand and reduce existing stocks,” said Sonal Varma, chief economist at Japan’s Nomura Bank.
protectionism risk
She told CNBC that protectionist measures “actually exacerbate price pressures globally for various reasons.”Asia street signs.“Feed and fertilizer costs for agriculture are already going up, and energy prices are driving up shipping costs,” she added.
“So there is a risk that we will see more protectionism from countries,” Varma said.
However, she emphasized that the risks to rice remain low as global rice stocks are abundant and crops in India are expected to be good this summer.
“Right now, I would be more concerned about India imposing a ban on rice exports in the coming weeks — as they were thinking after wheat and sugar,” David Laborde, a senior researcher at the International Food Policy Research Institute, told CNBC. .
India and China are the two largest rice producers in the world, accounting for more than half of the world totalAccording to the World Economic Forum. Vietnam is the fifth largest, while Thailand is in sixth place.
India imposed a wheat export ban in May, citing the need to “manage the country’s overall food security”. It also imposed restrictions on sugar just days after banning wheat.
Is higher prices preferable?
Laborde said a price increase would be much better than any export ban.
“We must differentiate between higher prices that compensate for higher costs and benefit farmers (and help them produce), and export bans” that raise prices on world markets but push prices down in local markets, he said.
Navis Mih, the regional representative for South Asia at the International Rice Research Institute, added that energy costs, which are increasing globally, make up a large part of the costs of rice production.
“So there is an argument to be made…if the market is signaling an increase in prices, why shouldn’t farmers benefit from higher prices?” Nafees told CNBC:Squawk Box Asia.“
But the increase in rice prices will badly affect many in Asia, which is the largest consumer of the commodity.
“So in Southeast Asia and the Pacific there are countries like East Timor, Laos, Cambodia and of course places like Indonesia, which [has a] A very large population, many of whom are food insecure, will be severely affected if prices continue to rise and remain at these very high levels,” Nafees said.
Much higher than pre-pandemic levels
Frederic Carrier, managing director and head of investment strategy at RBC Wealth Management, said the UN food price index showed prices are now 75% higher than pre-pandemic levels.
“Labour shortages linked to the pandemic and the Russian invasion of Ukraine have exacerbated the situation by slashing food supplies and driving energy prices even further,” she wrote in a June report.
About a third of food production costs are related to energy, Carrier said. Fertilizers in particular are energy-intensive to produce and prices have been rising since last year.
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