The largest increase for the same period in 20 years! Asian rice rose by 20% in May.

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War and weather are threatening supply prospects, with Asian rice prices recording their largest monthly increase in nearly twenty years in May.

In May, Thailand’s white rice—used as a benchmark for Asian prices—rose 20%, marking the largest monthly increase since at least 2008 when records began. Chicago Board of Trade rice futures also jumped 15% during the same period.

Due to fierce fighting causing near closure of the Strait of Hormuz, fuel and fertilizer supplies remain blocked. Farmers across Asia are under pressure from high production input costs, with some forced to delay or abandon planting.

Bin Hui Ong, a commodity analyst at Fitch’s research arm BMI, said prices will continue to rise, as the anticipated El Niño event may bring hotter and drier weather to parts of Asia, posing additional upside risk.

However, Peter Clubb, a market analyst at the International Grains Council, pointed out that major production areas, especially India, have ample inventories, and global demand remains relatively weak, which may limit the price increases in the international market.

Soaring Fertilizer Costs Force Farmers to Cut Production

The near closure of the Strait of Hormuz has severely disrupted fuel and fertilizer trade. Agricultural production systems in some Asian countries are highly dependent on imports.

According to the International Rice Research Institute, since the war began at the end of February, nitrogen fertilizer prices in Thailand, Cambodia, and the Philippines have collectively risen about 40% to 50%.

Alisher Mirzabaev, senior scientist of climate change and policy analysis at the institute, said, although inventories were sufficient in March to May, if fertilizer trade does not return to normal, shortages may quickly emerge.

Rice is known as a fertilizer-intensive crop, and irrigation pumps in rice fields usually run on diesel, making input costs highly sensitive to fuel prices.

Bloomberg reports that in Vinh Long Province in southern Vietnam, 60-year-old farmer Tran Van Be Bay used to plant three rice crops a year, but facing soaring fertilizer prices, he plans to skip one crop this year. He said:

With rising costs and hot weather, now is not a good time to sow. Applying more fertilizer costs more and also hurts the plants.

As the main planting season begins across much of Asia, similar choices are spreading among farmers.

El Niño Risk Heightens Supply Pressure

Weather factors are further amplifying supply uncertainties.

The El Niño phenomenon is expected to bring hotter and drier climate conditions to parts of Asia, posing an additional blow to already pressured rice production.

The Philippines has issued an early warning that a strong El Niño event could reduce rice output by as much as 700,000 tons, equivalent to 3.5% of its annual production target.

As a major rice importer in Asia, the Philippines’ signal of a production cut is an important indicator for regional supply and demand risk.

BMI’s Bin Hui Ong said the anticipated El Niño has provided further upward momentum for rice prices, prompting the agency to raise its price forecasts for Chicago rice futures.

Rice is crucial for food security in Asia. Major producing countries such as Thailand, Vietnam, and India are also important sources of global rice exports, so declines in Asian production will inevitably affect the global market.

Ample Inventories May Limit International Price Increases

Despite significant short-term bullish factors, global market price rises may still face a ceiling.

Peter Clubb, a market analyst at the International Grains Council, pointed out that major producing regions, especially India, have ample rice inventories, and global demand remains relatively weak; these two factors will to some extent restrain international price increases.

This means current price pressures are mostly regional, concentrated in Asian economies highly dependent on imports.

For such countries, regardless of whether there are major fluctuations in the international market, the rise in local production costs and potential output reductions have already created tangible food security and inflation risks, increasing the urgency for policy responses.

Risk Warning and DisclaimerThe market has risks; investments require caution. This article does not constitute personal investment advice and does not take into account the unique investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their own circumstances. Investments made accordingly are at one’s own risk. ```