– This is the script of CNBC's news report for China's CCTV on June 30, Friday.
Recently, the trend of increased global rice prices is bolstered by two reasons. Firstly, it is due to the low stockpile of rice, brought about largely by the Thai government. As we know, the rice subsidy scheme introduced by the Thai government bought local farmers' rice at above-market price. This was done to increase their income in a bid to boost domestic consumption hampered the rice market. Lasting for three years, this policy was quickly put to a stop in 2014.
Apart from causing the Thailand government to incur massive economic losses, it also caused Thailand's inventories to be bursting with excess rice supply. Being the second largest rice exporter in the world, these large rice inventories naturally have an impact on the global price of rice.
Since 2012, the excess in rice supplies and the weakening of major rice importers' economies cause the price of rice to remain at a feeble position. From these charts, we see the slump in rice prices from the past 5 years and since 2012, it has dropped by more than 20%.
What are some of the changes now? According to statistics, Thailand's aggressive selling has helped to reduce its stockpile dramatically, from 17.5 million tons to 8 million tons. The second contributing factor of rising rice prices is the significant rise in demand, especially from Bangladesh.
Currently, Bangladesh is experiencing serious flashfloods and as a result, its demand for rice has risen from 0.1 million tonnes to 0.4 million tonnes. Their increase in demand resulted in global trade of rice in 2018 to increase to 43.2 million tonnes. This would be the 3rd highest demand of rice in all of history.
As a result, global rice prices climbed to the highest level. Future prices are also increasing. Since the end of April, future prices have increased nearly by 30%. Analysts think that trend in the near future will see demand for rice steadily increasing, causing global stockpile of rise to decrease.
Regardless of ranking, the current top five exporters of rice are India, Pakistan, Thailand, Vietnam and America. The rice stockpile of these five exporters is the lowest since 2010. Coupled with adverse weather conditions in Bangladesh and Sri Lanka respectively, and a rising demand of rice in the Middle East and globally, one can expect the rice of price to be promising.