Spider trap rice fields in Flores, Indonesia. The latest May figures released last week by the United Nations Food and Agriculture Organization’s Food Price Index show that international rice prices are creeping up for the fifth consecutive month.
Food prices have been rising in the last few months. And industry watchers have said that rice, the staple food of most of Asia, is next.
Prices for many foods range from wheat and other grains to meat and oils. This has been driven by a number of factors, including the rising cost of fertilizer and energy over the past year and the Russia-Ukraine war.
Food export bans or serious obstacles include India (wheat), Ukraine (wheat, oats and sugar, among others) and Indonesia (palm oil).
Rice may be on the front line. According to the latest May figures published last week by the United Nations Food and Agriculture Organization’s Food Price Index, international rice prices are already showing for the fifth consecutive month to reach a 12-month high.
To be sure, experts say rice production is still plentiful. But rising wheat prices and generally higher farm costs make rice prices worthy of further monitoring.
“We need to monitor rice prices going forward, because rising wheat prices may lead to a slight alternative to rice, increase demand and reduce existing inventory,” said Sonal Verma, chief economist at Japanese bank Nomura.
Risk of protection
He told CNBC’s “Street Science Asia” that conservation measures “will actually worsen the price pressures globally for a variety of reasons.” Feed and fertilizer costs for agriculture are already rising and fuel prices are adding to commodity costs, he said.
“So we risk looking at greater protectionism from countries,” Verma said.
Nevertheless, he asserted that the risks to rice are still low, as there is plenty of global rice inventory, and harvesting in India is expected to be better this summer.
“Right now, I’m worried that India will be slapping the export ban on rice in the coming weeks – they’re thinking after wheat and sugar,” David Laborde, a senior research colleague at the International Food Policy Research Institute, told CNBC. .
According to the World Economic Forum, India and China are the world’s top two rice producers, accounting for more than half of the global total. Vietnam is the fifth largest, while Thailand is the sixth.
In May, India imposed an export ban on wheat, citing the need to “maintain the country’s overall food security”. Shortly after the wheat ban, it imposed restrictions on sugar.
Is the price rise worth it?
Laborde said the price increase would be worth more than any export ban.
“We really have to differentiate between high cost-of-price increases and benefit farmers (and help production) rather than export bans. This will raise prices in world markets but lower prices in domestic markets,” he said.
Nafis Meh, regional representative for South Asia at the International Rice Research Institute, said rising fuel costs globally are a big part of rice production costs.
“So there’s an argument to be said … If the market is suggesting an increase in prices, why can’t farmers benefit from increased prices?” Nafees told CNBC’s “Squawk Box Asia.”
But the rise in the price of rice has a bad effect on many in Asia, the largest consumer of staple foods.
“So in the Southeast Asia Pacific region, countries like East Timor, Laos, Cambodia and places like Indonesia, it’s [has a] A very large population, and many of them are food insecure, will be badly affected if prices continue to rise and remain at this high level, ”Nafees said.
More than pre-epidemic levels
Frederick Carrier, Managing Director and Head of Investment Strategy at RBC Wealth Management, said the UN’s Food Price Index showed that prices were now 75% higher than pre-epidemic levels.
“The pandemic-related shortage of labor and the Russian invasion of Ukraine have exacerbated the situation by curtailing food supply and further fuel prices,” he wrote in a June report.
One third of food production costs are related to energy, Carrier said. Fertilizer in particular is more energy-intensive for production and prices have skyrocketed since last year.