Pandemic drives up the cost of rice

23-Jan-2021 Intellasia | BangkokPost | 6:02 AM Print This Post

Tightening global supplies of basic foodstuffs and disruptions to shipping caused by the coronavirus pandemic are driving up the cost of rice, the most important staple food for billions of people worldwide.

Rising food prices are a worrying trend in countries that depend on imports, while the cost of rice is politically sensitive in many parts of Asia and Africa. A spike in the price of the grain led to unrest in several countries during the world food crisis of 2008.

Benchmark rice prices jumped 20%-45 percent in key Asian producers last year, while demand for lower-quality rice as an alternative animal feed and soaring shipping costs are raising concerns that poorer nations that rely on imports may face shortfalls in supplies.

“There are no immediate supply issues in Africa, but if exports from Asia get curbed… it could lead to worries between June and October which is traditionally a lean (production) period for northern and western Africa,” said the Food and Agriculture Organisation’s rice economist Shirley Mustafa in Rome.

“Logistical bottlenecks could lead to food supplies getting squeezed and food inflation, potentially aggravating the economic hardship caused by the Covid-19 pandemic.”

Sub-Saharan Africa is a major rice buyer, depending on imports for 40 percent of regional consumption, while in many parts of South and Southeast Asia by far the top rice producer and exporter rice is served at most meals.

Corn spillover

The price rises come as measures to slow the coronavirus pandemic distorted global food supply lines in 2020, adding to concerns about food security.

At the same time strong demand from China sent global cereal prices to their highest in six years, according to the FAO.

China’s grain consumption was so strong in 2020 that it not only depleted the county’s once-mammoth stockpiles, but also boosted crop imports to record levels and helped run up prices of corn, sorghum and barley largely used to feed animals.

A 25 percent jump in the price of corn, a key feed-grain ingredient, has spilled over into food-grade rice, as some animal feeders switch to cheap rice products that can also be fed to animals, such as 100 percent broken rice, a by-product of rice milling.

The cost of this variety of rice has climbed to $280 a tonne, free on board, at some of Indian ports, from $260 in December and is likely to rise further, according to local suppliers.

“Traditionally, African countries buy 100 percent broken rice since it is cheaper,” said Himanshu Agarwal, executive director at Satyam Balajee, India’s biggest rice exporter. “But lately Asian countries such as Vietnam and China have started buying 100 percent broken rice and are paying a premium over prices paid by African buyers.”

China, the world’s top rice producer, imported the grain from India for the first time in at least three decades last month.

“China is buying 100 percent broken rice for noodles as well as for feed,” said a Mumbai-based dealer with a global trading firm.

The global rice market was also clipped by drought in Southeast Asia which caused shipments from No. 2 and No. 3 rice exporters Thailand and Vietnam to drop more than a quarter in January through November 2020 compared to the same slot in 2019.

Prices of benchmark 5 percent broken rice from Thailand and Vietnam are up 19 percent and 45 percent respectively from a year ago, while domestic paddy prices in mainland China are up around 25%, according to Refinitiv Eikon.

Container shortage

Some high-end rice supplies were also hit by a global shortage of shipping containers, frequently used to carry bagged rice and other foods.

Containers are taking longer to unload in many countries due to coronavirus restrictions, yet remain in high demand due to booming e-commerce and for shipments of personal protective equipment.

This has led to a surge in the cost of shipping goods via container, and lengthy delays.

“From Pakistan for example, we used to pay $850 or $900 per container. Now, we’re looking at $1,650 to $2,100 per container,” said Mital Shah, managing director of Kenya-based Sunrice, one of East Africa’s largest rice importers.

Kenya consumes roughly 700,000 tonnes of rice annually, of which around 600,000 tonnes are imported, according to the United States Department of Agriculture.

The freight cost for shipping a tonne of rice from India to Africa has tripled to $150 from $50 in November.

“It’s a lot to ask for a commodity which costs less than $300 a tonne,” said one rice trader, referring to Indian broken rice.

African importers are banding together to buy bulk cargoes, traders and analysts said, but combined with the lower shipments from Southeast Asia, the container crunch has lifted prices and pinched rice supplies in key African markets.

“In another month or two, we will see some shortfalls of rice here,” said Sunrice’s Shah in Kenya. “We may be behind by 50,000 to 60,000 tonnes.”?

https://www.bangkokpost.com/business/2055007/pandemic-drives-up-the-cost-of-rice

 

Category: Thailand

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