A Rice Shortage is Causing Prices to Soar Worldwide, and the Situation Could Worsen

Francis Ndege isn’t sure if his customers in Africa’s largest slum can continue affording rice from him. Prices for locally grown rice in Kenya surged due to higher fertilizer costs and a prolonged drought in the Horn of Africa, reducing production. Cheap rice imports from India had filled the gap, feeding many of Nairobi's Kibera slum residents who survive on less than $2 a day.

However, the situation is changing. The price of a 25-kilogram (55-pound) bag of rice has increased by about a fifth since June, rising from approximately $14 to $18. Wholesalers have not received new stocks since India, the world's largest rice exporter by far, announced last month that it would ban some rice shipments.

India's move is an attempt to control domestic prices ahead of a key election year, but it has created a shortfall of approximately 9.5 million metric tons (10.4 tons) of rice needed by people worldwide, roughly a fifth of global exports.

“I’m really hoping the imports keep coming,” said Ndege, 51, who has been selling rice for 30 years.

He isn’t alone in his concerns. Global food security is already under threat since Russia halted an agreement allowing Ukraine to export wheat, and the El Niño weather phenomenon is hampering rice production. Now, rice prices are skyrocketing. For example, Vietnam’s rice export prices have reached a 15-year high, putting the most vulnerable people in some of the poorest nations at risk.

Beau Damen, a natural resources officer with the U.N. Food and Agriculture Organization based in Bangkok, says the world is at an “inflection point."

Even before India’s restrictions, countries were already scrambling to buy rice in anticipation of scarcity when El Niño hits, leading to a supply crunch and price spikes.

The situation could worsen if India’s ban on non-basmati rice triggers a domino effect with other countries following suit. The United Arab Emirates has already suspended rice exports to maintain domestic stocks. Another threat is extreme weather damaging rice crops in other countries.

El Niño is a natural, temporary warming of part of the Pacific Ocean that shifts global weather patterns, and climate change is making these events stronger. The ongoing El Niño is expected to expand to supersized levels and has historically resulted in extreme weather, from drought to flooding.

The impact would be felt worldwide. Rice consumption in Africa has been steadily increasing, and most countries rely heavily on imports. While nations with growing populations like Senegal have been attempting to grow more of their own rice, many are struggling.

Amadou Khan, a 52-year-old unemployed father of five in Dakar, says his children eat rice with every meal except breakfast, which they often have to skip when he's out of work.

“I am just getting by - sometimes, I have trouble taking care of my kids,” he said. Imported rice - 70% of which comes from India - has become prohibitively expensive in Senegal, so he's eating locally grown rice that costs two-thirds as much.

Senegal plans to turn to other trading partners like Thailand or Cambodia for imports, although the West African country is not far from being self-sufficient in rice, with over half of its demand being met locally, according to Agriculture Ministry spokesperson Mamadou Aïcha Ndiaye.

Asian countries, where 90% of the world’s rice is grown and consumed, are grappling with production challenges. The Philippines was carefully managing water resources in anticipation of reduced rainfall due to El Niño when Typhoon Doksuri struck its northern rice-producing region, causing damage estimated at $32 million, equivalent to 22% of its annual production.

The Philippines is the second-largest importer of rice after China, and President Ferdinand Marcos Jr. has emphasized the need to ensure sufficient reserves.

India’s rice restrictions were also motivated by erratic weather. An uneven monsoon and the looming El Niño led to the partial ban, aimed at preventing food price increases, according to Indian food policy expert Devinder Sharma.

The restrictions will offline nearly half of India's usual rice exports this year, said Ashok Gulati of the Indian Council for Research on International Economic Relations. Repeated restrictions make India an unreliable exporter, he added.

“That’s not good for the export business because it takes years to develop these markets,” Gulati said. Vietnam, another major rice exporter, is hoping to capitalize. With rice export prices at a 15-year high and expectations of marginally higher annual production than last year, the Southeast Asian nation is working to keep domestic prices stable while boosting exports.

The Agriculture Ministry says it's working to increase rice cultivation in the Mekong Delta by around 500 square kilometers - an area larger than 90,000 football fields.

The Philippines is already in talks with Vietnam to secure rice at lower prices, while Vietnam is looking to target the United Kingdom, which receives much of its rice from India.

However, exporters like Charoen Laothamatas in neighboring Thailand are cautious. The Thai government expects to ship more rice than last year, with exports in the first six months of this year 15% higher than the same period in 2022.

But due to uncertainty about India's next steps and concerns about El Niño, Thai exporters are reluctant to take orders, mill operators are unwilling to sell, and farmers have raised the prices of unmilled rice, according to Laothamatas, president of the Thai Rice Exporters Association.

With prices fluctuating, exporters don't know what prices to quote, as prices may spike again the next day. “And no one wants to take the risk,” Laothamatas said.

Source: Rastriya Samachar Samiti (RSS)