Rice price hits seven-year high in global market amid supply side issues
One of the effects of the Covid-19 outbreak has been the rise in world food prices. The price of rice, the staple food of most people in Asia, has hit its highest level in seven years.
The market reference price of white rice 5 per cent (WR 5%) has increased by 12 per cent (data between March 25 - April 1), the highest since April 2013.
Asia produces 90 per cent of the world's rice and is also the region that accounts for the same proportion of rice consumers. The increase in rice prices during this period is due to the expectation that demand for Thai rice will soar, as other rice exporting countries, such as India and Vietnam (the largest and third-largest rice exporters respectively), will limit rice exports to reserve for an emergency in their countries in view of the Covid-19 outbreak.
In India, the government has announced a nationwide lockdown for people to stay with their homes and avoid unnecessary travel to contain the spread of the disease. This has led to disruption of transport, affecting product distribution and causing labour shortage.
Indian rice traders have suspended new export contracts while the orders that have already been signed are facing delays in delivery. The Vietnam government too had announced restrictions on rice exports.
Rice prices have started to climb higher since the end of 2019, when Thailand, the world's second-largest exporter, experienced a drought, affecting productivity, while demand from Asian and African countries soared. Despite the expectation that rice production in Asia will increase this year and have more sales than last year, the price is likely to be high due to the Covid-19 situation.
In addition, Thailand also faces shortage of labour due to the city lockdown measures, while foreign workers such as those from Cambodia have travelled back to the home country. Labour factors may also affect planting and harvesting in the coming season.