KUALA LUMPUR (April 12): Global rice prices are expected to stay elevated throughout 2024 amid sustained market tightness due to unfavourable weather and export restrictions from India, BMI said on Friday.

The second-month rough rice futures listed on the Chicago Board of Trade are expected to average US$16.50 (RM78.69) per hundredweight (cwt) in 2024 versus US$16.69 in 2023, BMI, a unit of Fitch Solutions, said in a note. The contracts were at US$16.32 per cwt as of the end-of-session bell on April 5.

“It is our belief that international rice export quotations will remain elevated while India’s rice export restrictions remain in effect, which we expect will be the case until at least after the Indian general election,” BMI said.

Rice prices have surged as the 2023 export ban by India, the world’s largest rice supplier, stoked concerns over supply. Prices peaked in February at US$19.08 per cwt, their highest level since September 2008, and have averaged US$17.96 per cwt so far this year.

Drought concerns in Thailand, the world’s second-largest exporter of rice, have also added to production worries, as rice is one of the most water-intensive crops. Malaysia, where rice is also planted, has also grappled with a shortage of rice amid price spikes.

However, supply concerns may ease in 2025, according to BMI’s predictions, when the current El Nino event — a weather condition that increases heat and reduces rainfall — transitions to La Nina, which comes with higher-than-usual rainfall.

The global rice sector will return to net surplus with 4.9 million tonnes in the 2024/25 season with higher production, according to BMI’s projections, after three consecutive seasonal deficits between 2021/22 and 2023/24.

That may bring average price down 3.9% to US$15.85 per cwt in 2025, BMI said.

Production in Mainland China could expand 3.0% after two consecutive seasons of decline, and production will also increase across much of Southeast Asia and India with improvement in weather, BMI noted.  

However, the firm flagged that the Indian government is unlikely to lift export curbs given stubborn food inflation that accounts for 45%-46% of the consumer price index. “We do not believe that the passing of the election itself will prove to be sufficient reason to repeal the restrictions,” BMI warned.

India’s general election, in which Prime Minister Narendra Modi is widely expected to stay in power for his third term, will start on April 19 and span six weeks through June 1.