Countries like South Africa will contend with relatively elevated rice prices this year compared to the last, according to Agricultural Business Chamber(Agbiz) chief economist Wandile Sihlobo.
With South Africa being a net importer of rice, the worldwide surge of prices presents upside risks to consumer food price inflation.
He said that last year, rice prices were an agricultural outlier and remained generally subdued, especially in the months following the Russia-Ukraine war.
“This year started with a notable increase in prices from various origins. The comforting part, however, is that South Africa will likely import the same volume of rice as the previous year.
The International Grains Council (IGC) forecasts South Africa's 2023 rice imports at 1.1m tonnes. This estimation is roughly similar to imports in 2022, when about 73% of the imports originated from Thailand, 23% from India, and the rest from countries like India, Pakistan, Brazil, and Vietnam. These trading partners will likely remain the same in 2023,” Sihlobo said.
With regards to global supply, Sihlobo said that the outlook was slightly downbeat compared to the previous season, as the IGC forecast production of around 504m tonnes for 2022/23, which is a decrease of 2% year-on-year.
“This is mainly because of an expected decline in the harvest volumes in India, Vietnam, the US, Pakistan, China, Bangladesh, the Philippines and Brazil,” according to Sihlobo.
The unfavourable weather conditions and the reduction in planted area is the main driver behind this expected decline. Notably, due to solid consumption levels and the expected decline in production, the global rice stocks are forecast at 168m tonnes, which went down by 6% from the previous season,” he said.
Sihlobo said that these production dynamics were supportive of rice prices. “In Thailand, Pakistan, and Vietnam, rice prices are already trading at over US$450 per tonne. These are the highest levels in nearly two years. The price trend is unlikely to change in the medium term as the supplies will remain reasonably tight this year.”
Agricultural Economist for Agro-Food Chains at the Markets and Economic Research Division of the National Agricultural Marketing Council (Namc) Thabile Nkunjana said rice was one of the few food commodities that remained cheaper, despite several other agricultural commodities experiencing some of the highest food inflation last year. He said this could be linked to a significant supply from top rice producers globally.
He said that due to South Africa’s complete reliance on imports, it is an essential good for South Africa and two of the country’s key rice suppliers -Thailand and India - saw a noticeable rise in exports in 2022. Of the 1m tons of rice imported in 2021, he confirmed that 73% and 23%, respectively, came from Thailand and India. “As a result, rice was one the lowest priced food groups in 2022 in South Africa. For instance, a 2-kilogram bag of rice cost R37.85 in December 2022, which is 8.3% less than the R41.27 price that was reported for the same time period the year before.”
Nkunjana said this was despite global rice consumption seeing a strong expansion during the 2021/22 season as it was used by governments for food security programmes owing to reduced wheat availability as the war in Ukraine forced countries to look for alternative, affordable and accessible grains.
Following these developments, other countries, including India, started to impose trade restrictions to curb their own local food inflation, which was induced by the conflict in Ukraine.
“As anticipated, rice export prices responded, and since October 2022, they have been gradually climbing. A ton of rice from Thailand, a significant supplier of rice to South Africa, was selling on average for US$421 at the end of October 2022, but by the end of January 2023, it had increased to US$489, a 16% rise.”
He added that over the past two months, the IGC rice sub-Index increased by 8%, supported by an increase in global demand, currency movements as countries continued to fight inflation, and worries about South Asian supply while traditional rice-consuming countries like Vietnam and the Philippines were expected to import more rice than usual.
Nkunjana said global rice stockpiles, according to the United States Department of Agriculture, were at their lowest level since 2017/18 as of last month. “However, the situation is still predictable for the time being because more exports, primarily from Brazil and India, are anticipated. However, their grain export deal, which allowed for the export of other grains from the Black Sea region and reduced the demand on the world’s food supplies, expires in mid-March 2023.”
Nkunjana said what would happen after the grain export deal expires and from major rice exporters like India, Thailand, Pakistan, the USA, and Brazil would be crucial in maintaining South Africa’s rice prices at current levels because rice remained amongst the top three staple grains consumed in the country together alongside wheat and maize.
BUSINESS REPORT