Wheat and corn are the most actively traded grains in financial markets. But they can’t damage the global economy like rice. The staple for half the world is largely ignored by Wall Street, but it’s the one commodity that really matters for global food security.
For the last three years, Asia and African nations had been on the defensive: A dangerous mix of bad weather, protectionism and panic buying fueled an inflationary spike. Many feared worse was still to come — a full-blown crisis accompanied by violence. It didn’t come to pass, though, and now that the weather is starting to improve, it's becoming clear the rice price scare is all but over. Food inflation, particularly in Asia, is starting to ease.
For long, I’d been skeptical that the world faced another food crisis like the one in 2007-08, when the cost of rice jumped to a record high of about $1,100 per metric ton, up from $250 a ton, triggering a wave of dozens of food riots, from Haiti to Bangladesh. The opposite was true, I argued: While rice prices rose, they weren’t as uncomfortably high as wheat and corn.
Although several Asian nations reaped lower-than-expected rice harvests starting in 2021, global inventories were much higher than in 2007-08, providing a cushion. As production lagged consumption, prices nevertheless rose. From about $400 a ton in 2019, they climbed to a 12-year high of $650 a ton last year, and since they remained around that level until only recently. Still, rice prices were about 40% below their all-time high.
In any commodity market, government policies are important. But in rice they’re crucial. Critical as the crop is, not much rice crosses borders; most is consumed domestically. Only about 10% of the world’s rice crop trades internationally. By contrast, more than 25% of wheat and 40% of soybean output are traded, respectively. As such, small changes in exports and imports have an outsize impact on world prices.
Asian governments are now reconsidering the subsidies and restrictions that sent prices spiraling. In India, seasonal monsoon rains have arrived this year on time, and rainfall is about average, spurring a nearly 20% year-on-year increase in rice planting. Several of its neighbors are already lobbying Prime Minister Narendra Modi to act soon.
Other than in parts of China, southern Vietnam and the Philippines, weather conditions are “generally favorable” for the rice harvest, the United Nations Food and Agriculture Organization said recently.
As a result, global rice production in 2024-25 is expected to reach a record high of 528.2 million tons, according to the US Department of Agriculture. That would exceed global consumption, estimated for 2024-25 at 523.5 million tons. Thus, inventories will rebuild after three years of declines.
Now, it’s the time to strengthen the rice industry.
First, Asian governments need to do more to support farmers, particularly to ensure resilience against droughts. Irrigation is key. Advances in agricultural genetics, which can create seeds that tolerate both less rainfall and flooding, should be encouraged, not banned. Chinese scientists have completed trials of new genetically modified rice varieties that offer much hope. African nations, too, need to reduce their import dependence.
Second, governments should recognize that rice is a thinly traded commodity, and thus any export restrictions and hoarding encouragement can have far-reaching consequences. They should agree on regional norms to keep trading flowing, other than during catastrophes. As the world’s top exporters and importers, India and the Philippines should take a lead on those talks.
Third, it’s clear that some large importers, particularly in West Africa and the Middle East, need to build national reserves Recently, Isabella Weber, an economist who ignited controversy in 2023 blaming corporate greed for the surge in inflation, has published a new paper suggesting that grain buffer stocks could be released during emergencies – much as Washington opens the taps of its Strategic Petroleum Reserve. I don’t agree with every bit of her paper, but a limited version of her proposal, at the very least, merits consideration. If it works for oil, why not for rice?
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