Will it continue to rise? Does China Need Anxiety?, Depth | Global rice prices stand at the highest point in the past 12 years in China | High point in the past 12 years | Global rice prices

In just July, the soaring global rice prices have once again reached a new high.

According to data recently released by the Food and Agriculture Organization of the United Nations, the global rice price index rose 2.8% month on month to 129.7 points in July, the highest level in nearly 12 years. Asian rice prices have climbed to the highest point in nearly 15 years.

Frequent extreme weather and restrictions on exports by major rice producing countries are considered the driving forces behind high rice prices. So, when will this wave of rising rice prices end? What are the impacts and thoughts on responding to the food crisis?

Soaring into the sky

From a wave of newly released data, I can somewhat understand what it means to be as expensive as a pearl.

According to data from the Food and Agriculture Organization of the United Nations, the global rice price index rose 19.7% year-on-year to 129.7 points in July, setting a record high since September 2011. Asian rice prices have skyrocketed to the highest level in nearly 15 years.

The largest price increase is in Thailand. According to data released by the Thai Rice Exporters Association on Wednesday, the price of Asian benchmark rice - Thai white rice - climbed to $648 per ton this week, the highest price since October 2008, up nearly 50% from last year.

In the past year, the global rice market prices have risen by 15-20%.

How could the price of rice soar like a rocket?

Analysts believe that extreme weather and El Ni ñ o are important fuels driving up rice prices.

According to Reuters data, with the development of El Ni ñ o, export rice prices continue to rise.

The export price of rice from India has risen to a new high in five years, while Thailand and Vietnam have reached a new high in two years.

"The impact of the El Ni ñ o phenomenon is not limited to one country, it affects the production of almost all rice producing countries," said Nitin Gupta, Vice President of Oran India's Rice Business.

For example, Thailand, the world's second largest exporter of rice, is facing the threat of drought, while Vietnam's summer and autumn harvests are being impacted by rainfall. In Pakistan, the catastrophic floods of 2022 washed away most of the crops.

India has also experienced a reduction in rice production due to abnormal weather conditions such as drought, and was forced to lift a ban on rice exports last month to stabilize domestic prices and ensure market supply.

The report from the Food and Agriculture Organization of the United Nations points out that the potential impact of India's rice export ban last month, as well as the El Ni ñ o phenomenon and other adverse weather conditions, have intensified concerns about global rice supply and further pushed up rice prices.

As the world's largest exporter of rice - accounting for over 40% of global exports, India exported about 56 million tons last year. It tightened its "rice bag" and many countries around the world may go hungry along with it.

Hu Bingjie, a researcher at the Institute of Rural Development of the Chinese Academy of Social Sciences, believes that the El Ni ñ o phenomenon and recent frequent floods will naturally cause a certain degree of reduction in rice production in rice growing areas. However, the main reason for the increase in rice prices in July is due to export restrictions in some countries. Represented by India, which accounts for over 40% of the world's rice exports, it has issued export bans to ensure domestic market supply. Subsequently, Russia and the United Arab Emirates have successively increased their rice exports.

Zhang Jun, Dean of the School of Economics at Fudan University, stated that India is a major producer and exporter of rice, with arable land accounting for one tenth of the world's total. The reduction in domestic grain production and the issuance of export bans are bound to have a significant impact on rice prices.

To make matters worse, the timing of India's restrictions on rice exports last month was not favorable. The global food market has been in trouble due to extreme weather and the suspension of the Russia Ukraine grain transport agreement last month.

According to a report by the Food and Agriculture Organization of the United Nations, international wheat prices rose 1.6% in July due to uncertainty in Ukraine's exports, marking the first month on month increase in nine months.

Zhang Jun also pointed out that the high price of rice is to some extent a result of global trade contraction.

Zhang Jun noticed a change. After the outbreak of the COVID-19 epidemic, most countries are adjusting their strategic thinking on trade: globalization thinking is retreating, and self-sufficiency thinking is rising. Most countries prioritize their own security, including food security, as a top priority and want to reduce their dependence on trade, rather than prioritizing exports and hoping to solve problems through trade.

"This change objectively leads to a contraction in global food trade and is transmitted to fluctuations in international food prices."

Is it not a "systemic rise"?

Will the price curve of rice continue to rise as it hovers at a high level in over a decade?

Analysts believe that the future trend may depend on some key factors.

Firstly, there are climate factors.

"In the coming months, the global rice price trend will depend on the impact of the El Ni ñ o phenomenon," said Oscar Chakra, Senior Analyst for Food and Agriculture Integrated Enterprise Research at Rabobank in the Netherlands.

Cai Xuebin, Senior Economist at the Investment Banking Group of Malayan Bank in Singapore, also believes that the biggest risk is whether the El Ni ñ o phenomenon and climate change will disrupt agricultural production and drive up overall food inflation levels.

For example, although Thailand has explicitly stated that it will not ban rice exports, due to the arrival of the El Ni ñ o phenomenon, Thailand is facing even drier weather. The government has encouraged farmers to reduce rice cultivation and switch to crops that require less water.

Secondly, there are policy factors.

Samarrendu Mohanti, regional head of the International Potato Research Center for Asia, said that if importing countries try to stockpile rice to ensure domestic food security, and exporting countries implement export restrictions, rice prices may continue to rise.

Chakra predicts that the rice price index in August will be higher than in July. Part of the reason is that the export ban in India was introduced at a time when major global rice suppliers had low seasonal inventories.

Peter Timor, an emeritus professor at Harvard University who has been studying food security for decades, predicts that rice prices may further rise in the next 6 to 12 months.

"The biggest problem is whether the price increase is gradual and can allow consumers to cope calmly, or will it soar to $1000 per ton or higher, similar to the situation of the 2008 food crisis."

For this wave of rising rice prices, Hu Bingjie believes that there is no need to be overly nervous, as prices are expected to fall within a year.

He referred to this rise as a "technical fluctuation" rather than a "systemic rise". The previous crisis in Ukraine has driven up food and energy prices, which belongs to the "systemic rise". But the main change this time is the supply and demand relationship of rice, and the prices of other foods are relatively stable, belonging to a "phased increase".

"Macroscopically speaking, the rice market is also stabilizing. The total global rice production is over 500 million tons, of which the trade volume is only 50 million tons, which means that most rice is produced by oneself." Hu Bingliang said that when Western countries relied on wheat as their food, the people who ate rice mainly gathered in Asia, which is also a major rice production area. A shorter transportation radius, coupled with a state of self-sufficiency, and an increase in rice prices will stimulate other countries to invest in increasing production, resulting in a natural decline in rice prices.

"The highest global food prices will not exceed 2024 at the longest," said Hu Bingliang.

Zhang Jun stated that from the perspective of the global food supply and demand relationship and the increasing agricultural productivity, ensuring food supply is not a problem and maintaining relatively stable prices can also be achieved. Even if climate factors cause a reduction in food production, it is only a short-term impact.

"However, there is still a significant long-term impact on global food prices that cannot be ignored." Zhang Jun said that if countries prioritize food security and hope to reduce their dependence on trade, major grain producing countries will restrict exports, leading to further trade contraction. Coupled with complex geopolitical factors, it may create space for rising food prices and remain high for a period of time in the future.

As for the impact of high global rice prices on China, Zhang Jun believes that the impact will not be significant and there is no need to worry.

"China has always attached great importance to the issue of grain, emphasizing the importance of putting the rice bowl in its own hands, and adopting systematic policies and measures to ensure self-sufficiency in grain." Zhang Jun said, including ensuring that arable land cannot be reduced and maintaining the red line of 1.8 billion mu of arable land; The national policy of developing major grain producing areas stipulates that grain must be grown in these areas and no other crops can be grown; Provide policy support for food and agriculture, provide national subsidies, and so on. Therefore, the entire supply and demand relationship will not experience significant fluctuations. This year, despite the extreme special weather and the flood caused by extremely heavy rainstorm in the north, China has a large stock of grain. If the flood has an impact on grain prices, we will consider using the stock to offset some of the impact.

How does it affect geometry?

Food is paramount to the people, and about half of the world's population relies on rice as their staple food. The potential impact of high rice prices has attracted attention from all parties.

Bloomberg pointed out that the soaring price of rice will exacerbate inflationary pressure, push up food prices, and make food costs higher for underdeveloped countries and impoverished families in Asia and Africa, where rice is their staple food.

The Food and Agriculture Organization of the United Nations reported that the global commodity price index rose 1.3% in July, the second increase since April, reflecting the impact of the suspension of the Black Sea food export agreement and India's restrictions on rice exports.

"The rise in grain prices may also stimulate the introduction of more protectionist policies, including export restrictions, thereby exacerbating global food shortages and price pressures," said Cai Xuebin.

Zhang Jun is concerned that some developing countries and emerging market economies that rely on food imports may be greatly impacted by the rise in rice prices, which may drag down economic recovery and even trigger food security issues.

While emphasizing that the current increase in rice prices is "normal" and "controllable," Hu Bingjie also pointed out several impacts.

Firstly, change the food consumption structure in some regions. For sub Saharan Africa, which heavily relies on rice imports, when people cannot afford it, they will reduce their rice consumption and change their food consumption structure.

Secondly, increasing the financial burden on third world countries. If a country has a serious contradiction between human and land resources and is highly dependent on trade, it will first be exposed to risks when encountering problems such as mismatched supply and demand resources. Once agricultural inflation resurfaces, the most affected countries will undoubtedly be emerging market countries in Africa and other regions that are economically depressed and heavily dependent on food imports.

Analysis also points out that the current global food crisis and global food distribution imbalance are closely related, and there is a huge gap in food resources between different countries and regions.

Hu Bingbing bluntly stated, "The food crisis is related to distribution, and rising prices will indeed worsen international food distribution. Any price increase will only make the poor poorer."

Regarding concerns about food prices, some media have called for international food aid, but Hu Bingbing stated that the capacity of international organizations is limited.

In Africa, where infrastructure conditions are extremely poor, the 200 kilometer road from a port in West Africa to the inland is like a trench that cannot be crossed, greatly reducing the market access and value realization of developed countries. It's better to shift the focus to road and bridge construction, engage in infrastructure construction, promote industrial upgrading locally, and develop characteristic and efficient industries. "Teaching people to fish is not as good as teaching them to fish. This experience can be borrowed by the world."