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Global rice prices to stay hot until 2025, warns World Bank

14 December 20234 min reading

In the latest World Bank Global Commodity Outlook, a stark prediction has been made – global rice prices are unlikely to see a significant cool down before 2025. This forecast is attributed to export restrictions imposed by major rice-producing nations and the persistent threat of El Niño.

The report indicates that global rice prices, which saw a 28% increase in 2023 compared to 2022, are poised to rise by an additional 6% in 2024. A combination of factors, including the looming El Niño threat, policy responses from key exporters and importers, and the concentration of rice production and exports, contribute to this concerning projection. This situation raises concerns for India, facing a potential drop in domestic kharif rice production in 2023 due to unfavorable monsoon conditions.

While the report anticipates a 7% decline in agricultural prices in 2023, and a further 2% decrease in 2024 and 2025 due to ample supplies, the focus remains on the persistent rice price surge. Maize prices are expected to end the current year 22% below 2022 levels, and wheat prices are projected to average 20% lower in 2023, with additional declines of 3% and 5% expected in 2024 and 2025, respectively.

In terms of fertilizers, prices are expected to decrease as more supplies become available online. However, they are likely to remain above historical averages due to supply constraints and China’s ongoing export restrictions.

The report sheds light on several key findings and projections in the grain markets, highlighting the impact of geopolitical events on agricultural prices. Since the onset of the conflict in the Middle East, agricultural prices have seen a 4% uptick, primarily driven by increases in tropical commodities. Despite robust grain harvests, El Niño-induced weather disruptions and geopolitical events have caused significant price spikes in certain commodities, including rice and cocoa.

The report underscores the worsening food insecurity in lower-income and lower-middle-income countries in 2023, with a more than 12 percentage point increase in moderate or severe food insecurity between 2015 and 2022.

Recent developments in grain prices indicate a 7% easing in the World Bank’s grains price index in the third quarter of 2023. While maize prices dropped 18% in this period, wheat prices declined more than 10%. Ukraine, a major grain exporter, experienced a bumper harvest in 2023, contributing to stabilized grain markets despite ongoing geopolitical tensions.

Rice prices, however, surged by 18% in the third quarter of 2023, reflecting export bans and trade restrictions, especially from India, the world’s largest rice exporter since 2011. India’s export restrictions, driven by domestic price concerns and fears of El Niño impacts, have disrupted global markets since mid-July.

The report acknowledges heightened geopolitical risks, especially in the wake of the Middle East conflict, constituting a significant upside risk to commodity prices. If the conflict intensifies, substantial supply disruptions and soaring prices could follow, based on historical precedent.

Looking ahead, assuming the Middle East conflict does not escalate further, the grains price index is expected to decline by 3% and 5% in 2024 and 2025, respectively. While rice prices are anticipated to remain elevated in 2024 due to ongoing El Niño and India’s export restrictions, the decline in maize and wheat prices, driven by improved global grain supplies, is expected to offset this trend.

The World Bank emphasizes the resilience of agriculture to short-term price fluctuations, citing long-term trends in global grain markets. Despite overlapping shocks, global grain yields have steadily increased, and the world is trading an increasing share of its production. Supply and demand quickly adjust to price changes, mitigating the impact of localized disruptions.

However, the report highlights key risks to food price forecasts, including the escalation of the Middle East conflict, climate change, and geopolitical tensions affecting trade. The World Bank emphasizes the importance of monitoring these factors for accurate projections and ensuring global food security in the face of evolving challenges.

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