The UN FAO Rice Price Index signals that rice prices rose 9.8% in August, compared to July, reaching a 15-year nominal high, “reflecting trade disruptions” caused by India, the organization notes.

“Against a backdro of seasonally tight availability ahead of new-crop harvests, uncertainty over the ban’s duration and concerns that export restrictions would be extended to other rice types caused supply-chain actors to hold on to stocks, renegotiate contracts or stop making price offers. Thereby limiting most trade to small volumes or to previously concluded sales,” says FAO.

India, the world’s largest rice exporter, is dealing with the effects of an irregular climate.

“India began 2023 with record-breaking high temperatures. July saw heavy rains and flooding. However, the next two months are expected to be drier than usual, with monsoon rainfall in 2023 likely below normal. August ended with a 36% rainfall deficiency, the worst in 122 years,” Shri Saket Dalmia, president of the PHD Chamber of Commerce and Industry of India, tells Food Ingredients First.

“The warming of the western Indian Ocean is contributing to these patterns, causing increased precipitation extremes over central India,” he notes.

However, some relief might be on the horizon if El Niño isn’t worse than expected: “Going ahead, monsoons are expected to stabilize in the coming months,” Dalmia highlights.

India’s ban cascading consequences
After India’s sudden ban on non-basmati white rice, some Indian consumers engaged in hoarding and panic buying, causing sporadic shortages in some US supermarkets. 

Some price relief might be on the horizon if El Niño isn’t worse than expected.In the following weeks, the United Arab Emirates established a ban on rice exports and re-exports. Myanmar imposed a two-month export ban on rice exports as production has been irregular due to the ongoing civil war. Moreover, Thailand and Vietnam – the world’s second and third rice exports – are renegotiating sales contracts.

Meanwhile, the Philippines authorities announced today they are looking to cut the 35% import tariff on rice to a range between 0% and 10%. 

Pressure on prices
According to FAO, El Niño has led to “irregular rains on production” in Thailand – with production estimates down over two million metric tons from last year to 19.6 million metric tons, according to the US Department of Agriculture. Moreover, there have been production shortfalls in Brazil and Argentina. 

Furthermore, while heavy rains are common amid typhoon season in China, some places like the city of Shangzhi are being battered by unusually intense rains.

However, main-crop plantings in various important global rice producers “have remained robust, if not expanded,” which could help “compensate for, if not outweigh,” yield depressions caused by uneven rains or planting cuts.

The UN body is optimistic about production recoveries in Cambodia, Myanmar, Pakistan, Sri Lanka, Bangladesh, Nigeria and the US in the next season.

Record temperatures scorch India
India has been shocked by two years of scorching heat and droughts. Nonetheless, Dalmia underscores he sees some price relief coming.

“Jump in the prices of vegetables, cereals, pulses and spices vis-à-vis supply disruptions due to abnormal monsoon behavior in many parts of the country have stoked food inflation.”The UN FAO Rice Price Index signals that rice prices are at a 15-year high.

“As monsoon behavior is stabilizing in recent weeks, the prices of food products have also started softening and food inflation trajectory is expected to come down significantly in the coming months,” he explains. 

Tomato price relief in India
While food inflation in India keeps increasing, Dalmia tells us that the worst might have passed for vegetables like tomatoes.

“Tomato prices experienced a meteoric 600% inflation in the past year due to a combination of factors. Being highly perishable, tomatoes often undergo seasonal price fluctuations,” Dalmia says.

“This increase was exacerbated by the white fly disease outbreak in Kolar, Karnataka, instant monsoon rains impacting crops in regions like Haryana and Himachal Pradesh and logistics disruptions due to heavy rains. Thankfully, recent trends show prices are decreasing, now ranging from Rs. 50-60 per kg (US$0.6 to US$0.72), which is approximately 75% lower than the peak prices, offering relief to consumers,” he explains.

Nonetheless, the inflation rate of pulses and products increased from 10.5% in June 2023 to 13.3% in July 2023, while for cereals and products, it increased from 12.7% in June 2023 to 13% in July 2023 and for spices, from 19.2% in June 2023 to 21.6% in July 2023.