SINGAPORE, (Reuters) – Nearly a decade after a spike in global food prices sent shockwaves around the world, Asia’s top rice producers are suffering from a blistering drought that threatens to cut output and boost prices of a staple for half the world’s population.
World rice production is expected to decline for the first time this year since 2010, as failing rains linked to an El Nino weather pattern cut crop yields in Asia’s rice bowl.
A heat wave is sweeping top rice exporter India, while the No.2 supplier Thailand is facing a second year of drought. Swathes of farmland in Vietnam, the third-biggest supplier, are also parched as irrigation fed by the Mekong river runs dry.
The three account for more than 60 percent of the global rice trade of about 43 million tonnes.
“As of now we haven’t seen a large price reaction to hot and dry weather because we have had such significant surplus stocks in India and Thailand. But that can’t last forever,” said James Fell, an economist at the International Grains Council (IGC).
Rice inventories in the three top exporters are set to fall by about a third at the end of 2016 to 19 million tonnes, the biggest year-on-year drop since 2003, according to Reuters calculations based on U.S. Department of Agriculture data.
Any big supply disruption can be extremely sensitive. In 2008, lower Asian rice output due to an El Nino prompted India to ban exports, sending global prices sky-rocketing and causing food riots in Haiti and panic measures in big importers such as the Philippines.
Manila at the time scrambled to crack down on hoarding, ordered troops to supervise subsidised rice sales and asked fast food chains to serve half-portions, as well as urging Vietnam and others to sell the country more rice.
The world has suffered a series of food crises over the past decade involving a range of grains due to adverse weather.
In the case of rice, benchmark Thai prices <RI-THBKN5-P1> hit a record around $1,000 a tonne in 2008. Price spikes like this typically also boost demand for other grains such as wheat, widely used for noodles in Asia, and soybeans and corn used for food or feed.
While currently far below 2008 highs, rice earlier this month hit $389.50, the strongest since July and up 13 percent from an eight-year low of $344 in September.
Bruce Tolentino of the Philippines-based International Rice Research Institute is concerned about Asia’s vulnerability.
“In general prices are still stable right now. They’re inching up though, and what will drive things over the edge will be a major calamity in one of the major producing countries.”
Although India’s rice output in 2015 was largely stable, extremely hot temperatures are threatening a second crop in eastern regions.
Traders see further price gains by June as India’s next big crop is not due until September and Thailand’s main crop by year end.
The IGC sees a 2016 world harvest of 473 million tonnes, down from 479 million tonnes in 2015 and the first decline in six years.
