The new normal during the rice crisis.

Is the global food crisis the new normal?

In the first seven months of 2023, rice exports reached over 4.83 million tons, worth US$2.58 billion, an increase of 18.7% in volume and 29.6% in value compared to the same period last year, according to the General Statistics Office. (Source: VNA)

From Indian rice to Australian wheat, climate change is impacting yields, exacerbating food shortages and driving up prices amid the Russia-Ukraine military conflict.

The global market has been volatile for weeks following India's official ban on rice exports. Several other countries have also restricted exports, while others seek to increase imports to ensure food security. As a result, rice prices on the world market have been rising. In Asia, prices have reached their highest level in 15 years. In India, rice prices have increased by more than 30% since last October.

Could the new normal be climate shocks, conflicts, and competition for natural resources, further exacerbating food inflation and harming global agricultural production?

The risk of rice shortage is imminent.

In late July, India announced a temporary halt to white rice exports to control soaring domestic inflation and secure domestic supply. New Delhi stated that it was forced to take action due to excessively high international prices. Following Russia's withdrawal from the Black Sea Grains Initiative, India's export restrictions risk triggering a broader food crisis, leading to soaring prices and increased risk of famine.

With elections approaching in India, this export ban, like in several other countries, seems unlikely to be lifted in the short term.

The Lowy Institute for Economic Research's website assesses that concerns about rice shortages are growing across Asia—the region that produces and consumes 90% of the world's rice. This is due to significantly reduced rice production, soaring international prices, and limited global fertilizer supplies.

Meanwhile, partly due to the impact of El Nino, the rice supply from leading rice-exporting countries such as Thailand (accounting for 15% of global rice exports) and Vietnam (14%) is struggling to fill the gap left by Indian rice.

Many other countries are reportedly following in the footsteps of India and the United Arab Emirates (UAE) in restricting rice exports. While some major rice suppliers are currently boosting exports, some argue that it cannot be ruled out that other countries, such as those in Southeast Asia, may decide to restrict rice exports to address domestic stockpiling.

Other rice producers in Asia have faced recent extreme weather events. Droughts in some countries (Bangladesh, Thailand), but floods and heavy rains in others (China), in addition to the unclear but predictedly severe El Niño phenomenon in the 2023-2024 crop year.

Climate shocks are causing great concern among governments. The Philippine President's office has issued recommendations to prepare for El Niño. Indonesian President Joko Widodo has warned of a prolonged dry season ahead of next year's elections.

Thailand fears El Nino could last until 2025, causing over 40 billion baht in damage to agriculture, and farmers have been urged to plant only one rice crop per year to conserve water. Meanwhile, key regions of China – the world's largest rice producer – are being affected by heavy rainfall.

A golden opportunity for major manufacturers?

To avoid a repeat of the 2007-2008 food price crisis, and to address concerns about shortages and inflation, governments of rice-consuming countries are rushing to buy and increase their reserves.

China is striving to increase its national reserves. Indonesia plans to import rice from Cambodia and Myanmar to support the government's rice reserves…

Meanwhile, a widespread decline in agricultural production—including rice production—will have a domino effect, leading to limited supply on the global market. This, combined with increased stockpiling demand, could lead to increased competition from importing countries and drive up food prices even more sharply across Asia and beyond.

In an increasingly complex geopolitical environment, where food security is an integral part of national security, such situations exacerbate competition for food supplies and, more dangerously, can escalate and spread socio-economic tensions across the region.

Amidst the "headache" many governments face in sourcing rice, countries like Australia – an agricultural powerhouse and global wheat producer – may find opportunities to increase its involvement and boost exports at the right time.

Vietnam is considered one of the major suppliers that can seize the "golden" opportunity to boost rice exports to the world, as both demand and export prices are increasing daily.

According to the Vietnam Food Association, rice exports are favorable, especially in the last months of the year, as major markets such as China, the Philippines, and Malaysia continue to buy strongly. Meanwhile, consumers in demanding markets such as Europe, South Korea, Australia, and some newly opened markets in the Middle East are favoring high-quality Vietnamese rice, creating opportunities for increased rice exports.

According to the US Department of Agriculture (USDA) report in July 2023, world rice production for 2023/2024 is projected to reach 520.8 million tons, an increase of 8 million tons compared to the previous year. Total global consumption is expected to reach a record 523.9 million tons, exceeding projected rice production by 3.1 million tons. Coupled with the lowest end-of-season stock levels since the 2017/2018 crop year, this indicates a supply-demand imbalance, as the demand for rice reserves increases while supply and stocks from previous years are decreasing.

This clearly creates opportunities for Vietnamese rice exports, because according to the Ministry of Agriculture and Rural Development, in 2023, Vietnam still has enough supply to export about 7.5-8 million tons of rice, of which high-quality rice accounts for a large proportion. The average export price of rice in the first six months is estimated at over 540 USD/ton, an increase of more than 10% compared to the same period in 2022 and the highest level in the past decade.

However, whether or not we seize this opportunity depends not only on weather conditions and climate change, but also on future investment in the agricultural sector.

Source: https://baoquocte.vn/an-ninh-luong-thuc-toan-cau-binh-thuong-moi-thoi-khung-hoang-lua-gao-243063.html