Introduction
Rice is a crucial staple for over half of the world’s population, and there might be a shortage that puts communities that need affordable rice on the precipice of crisis.
The only shortage out there right now is India’s plain, white, long-grain rice. It’s cheap and of lower quality than what they ship to developing countries.
because rice is loved all over the world and also continues to be manipulated as a commodity by governments around the world.
India’s export bans are reverberating through global rice markets. You know, the protectionist measures basically send a panic signal globally.
The US has been dealing with India’s oversubsidization. They’ve created this monster by subsidizing so much that now there are so many rice farmers that if they upset those farmers, that’s a huge voting block.
America’s rice industry contributes over $34 billion to the economy. But US farmers face the same volatility. And you know, our farmers—they’ll go up against any rice farmer in the world, but they can’t compete with a foreign government.
With rice, it’s not just the question of having enough water, but having enough water at the right time. So it doesn’t need to be corn or a soybean to be incredibly important to the US agricultural economy.
Here’s how rice markets can threaten affordable food, trade, relationships, and the livelihoods of millions of farmers.
Rice farming
There are about 40,000 different varieties of rice, but the market is comprised mainly of long-grain, medium-grain, and short-grain races, as well as higher-value rices like jasmine and basmati rice.
We’re on 3 million acres, as opposed to some of the other crops. It’s a crop that makes use of a lot of land that other crops can’t make use of.
Most of the rice harvested in the US is eaten in the US. About 80% of it And also, if you think about your cereals like Rice Krispies, you know, Kellogg’s,
Tex-Mex, or Chinese food, is a food service like Chipotle. Rice is a key input into many products that we consume, but especially beer. Anheuser-Busch is the number one domestic user of US rice.
Rice requires unique growing conditions. It’s a plant that’s half submerged in pools of water, often on top of heavy clay soils that wouldn’t effectively grow other crops. When you think of a rice field, you think of steps.
a field, maybe in India or maybe in Vietnam or Thailand. We don’t have land like that, right? Our land is flat, but the farmers will grade it slightly so that the water can move from one end of the field to the other, and they can capture it and recycle it.
While the US is the largest rice exporter outside of Asia, the US only accounts for around 5% of global rice exports.
Distorted markets
Some countries responded to the market shock with export bans. For an individual country, it makes sense to do export bans and help the more vulnerable parts of society.
But if a lot of countries do that, and they are doing that now, it further pushes up prices. Then, one of the top rice-producing countries limited exports. India, a country whose exports make up 40% of the world’s rice supply,
India is a larger rice exporter than the next four rice exporters in the world. In September 2022, India banned exports of broken rice and imposed a 20% duty on exports of some rice varieties.
India is a country that has suffered from food insecurity in a significant way. There’s an understandable desire to ensure the appropriate availability of staple foods like rice within the country.
But there’s a trade-off to that. You end up, you know, distorting the price signal for farmers. Rice prices spiked 15 to 20% by 2023.
Rice prices hit their highest in almost 12 years. India added another export ban in July 2023 on its plain white, long-grain rice. So it is concerning that we see a sharp rise in rice prices across the region.
The equipment is expensive, the investments are expensive, and then you have all these outside factors really working against you.
You know, a lot of times people will picture Ma and PA in overalls with a pitchfork. They’re not going to picture an $850,000 combine that’s sitting out there that’s connected to satellites. India’s rice export ban impacts developing countries.
Looming threats
that depend on its affordable rice. It’s impossible to think about rice without thinking about the food security lens.
Over 42 countries depend on India for over 50% of their total rice imports. The only shortage out there right now would really be India’s plain white, long-grain rice, which they ship to a lot of countries throughout Africa and Southeast Asia.
They don’t ship their best rice there. It’s cheap, and it’s lower quality. And when they slapped a ban in place, you know that that impacted those developing countries the hardest.
India has historically been the cheapest supplier of rice. Africa or Southeast Asia, they’re going to buy from India because they got a ton of rice. They can get it here fairly quickly.
For example, Indian rice made up over 80% of the market share in a number of African countries. But even in places like Indonesia, which is one of the largest producers itself, it is still vulnerable because it still requires imports to satisfy domestic demand.
India states that its export bans ensure ample food supplies domestically. However, at the same time, food inflation concerns are at the center of India’s elections.
You know, from an economic standpoint, it does not make sense for them to keep this ban in place or to have ever put it in place in the first place. It’s purely political.
You know, Prime Minister Modi is running for reelection. You know, he’s seen consumers complaining about increased inflation. Rice prices domestically
And what they’re really doing is trying to secure enough rice in their domestic market so that their prices will drop for consumers.
. India has stockpiles of rice in government storage and is harvesting one of the largest rice crops on record.
The other risks that we see are, of course, rising temperatures, but specifically rising nighttime temperatures, because rice likes this kind of warmer day and cooler night.
The rice industry faces environmental threats that can lower yields or destroy crops entirely, making it harder for farmers to make a profit.
For example, water is crucial for rice production, but it can’t be too much or too little. I think we’ve seen, you know, a significant drought in California, causing a 50% reduction in planted acres in 2022.
And that can become a breeding ground for pests and diseases, weeds and herbs, and other things that are already fairly challenging for rice producers.
Policy potential
When US rice farms can’t compete with global rice prices, the government may step in with additional financial safety nets, which is exactly what happened in 2022. The government passed the rice production program as a supplement.
$250 billion in funding that was provided by Congress at the end of 2022 was to support rice farmers who grew rice only during the 2022 crop year as a way to offset some of the losses that resulted from the extreme increase in input costs that did not correspond with the increases in crop prices that the farmers received.
USA Rice is lobbying Congress to include an updated safety net program in the next farm bill. A relatively small investment from the US government goes a long way in keeping our prices stable while also keeping us competitive on the world market. Rice farmers can already opt into USDA insurance programs like price loss coverage and agriculture risk coverage.
These programs exist really just to stop these farmers from falling through the cracks, because that would be a huge disaster, not just for the communities but for their food supply.
Rice-growing communities in the six states where it’s primarily grown are built around the rice infrastructure so that the rice mills, the rice dryers, and the farms employ people.
It’s the entire supply chain. I mean, these are very important pillars of these rural communities. USA Rice estimates that each rice farm adds $1 million, on average, to their local economies.
Rice farmers and exporters—they’re all going to suffer because of distorted prices. It’s such a risky business. On the other side of a rice shortage, it looks like the market can bounce back.
For the most part, Rice prices could drop nearly 10% by 2024. And if that happens, global rice markets may even reach a surplus by 2025.
And then that means that rice prices globally will tank. That will impact all of the countries that export rice again.
A farmer in Louisiana told me, You know, every year we take every bit of money that we’re worth and a little more, and we put it in the ground, and we hope we can come back in six months and harvest a crop and sell it at the market. Bull riding, helicopters, and what? Andy Frisella 25K views
