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The spider net rice fields in Flores, Indonesia. The United Nations’ Meals and Agriculture Group Meals Value Index reveals worldwide rice costs creeping up for the fifth straight month to succeed in a 12-month excessive, based on the most recent Might information printed final week.

Tanutkij Wangsittidej

Meals costs have been on the rise previously few months. And rice, a staple meals in a lot of Asia, may very well be subsequent, trade watchers mentioned.

The costs of many meals, starting from wheat and different grains to meat and oils, have shot up. That is been pushed by a slew of things, together with the rising value of fertilizer and vitality previously 12 months in addition to the Russia-Ukraine struggle.

Meals export bans or critical disruptions have included these from India (wheat), Ukraine (wheat, oats and sugar, amongst others) and Indonesia (palm oil).

Rice may very well be subsequent in line. The United Nations’ Meals and Agriculture Group Meals Value Index already reveals worldwide rice costs creeping up for the fifth straight month to succeed in a 12-month excessive, based on the most recent Might information printed final week.

To make certain, rice manufacturing remains to be bountiful, consultants mentioned. However rising wheat costs, and the widely increased prices of farming, would make rice costs value monitoring subsequent.

So there’s an argument to say … if the market is indicating a rise in value then why should not the farmers profit from elevated costs?

Nafees Meah

Worldwide Rice Analysis Institute

“We have to monitor rice costs going ahead, as a result of rising wheat costs may result in some substitution in the direction of rice, growing demand and reducing present shares,” mentioned Sonal Varma, chief economist at Japanese financial institution Nomura.

Danger of protectionism

Protectionist measures “really worsen value pressures at a world degree for varied causes,” she advised CNBC’s “Avenue Indicators Asia.” Feed and fertilizer prices for farming are already rising, and vitality costs are including to freight prices, she added.

“So there’s a danger that we see extra protectionism from international locations,” mentioned Varma.

Nonetheless, she maintained that dangers to rice are nonetheless low as international rice inventories are ample and harvests in India are anticipated to be good this summer season.

“Proper now, I shall be rather more anxious by India slapping an export ban on rice within the coming weeks — as they had been excited about after wheat and sugar,” David Laborde, senior analysis fellow on the Worldwide Meals Coverage Analysis Institute, advised CNBC.

India and China are the world’s prime two producers of rice, accounting for greater than half of the worldwide whole, based on the World Financial Discussion board. Vietnam is the fifth-largest, whereas Thailand is in sixth place.

India imposed export bans on wheat in Might, citing a necessity “to handle the general meals safety of the nation.” It additionally slapped restrictions on sugar simply days after the wheat ban.

Are value hikes preferable?

Laborde mentioned {that a} value enhance can be far preferable to any export ban.

“We must always actually differentiate between a value rise that compensates for increased prices and can profit farmers (and assist them producing), than an export ban” that pushes costs up on world markets however pushes costs down on home markets, he mentioned.

Nafees Meah, regional consultant for South Asia on the Worldwide Rice Analysis Institute, added that vitality prices, which have been rising globally, are a giant a part of rice manufacturing prices.

“So there’s an argument to say … if the market is indicating a rise in value then why should not the farmers profit from elevated costs?” Nafees advised CNBC’s “Squawk Field Asia.”

However a rise in rice costs would badly have an effect on many in Asia, which is the most important shopper of the staple.

“So in within the Southeast Asia Pacific area, international locations like East Timor, Laos, Cambodia and naturally, locations like Indonesia, which [has a] very massive inhabitants, and plenty of of whom are meals insecure shall be fairly badly affected if costs proceed to rise and keep at these very excessive ranges,” mentioned Nafees.

Manner above pre-pandemic ranges

The U.N.’s meals value index confirmed costs at the moment are 75% above pre-pandemic ranges, mentioned Frederique Service, managing director and head of funding technique for RBC Wealth Administration.

“Pandemic-related labor shortages and Russia’s invasion of Ukraine have aggravated the state of affairs by each curbing meals provide and pushing up vitality costs even additional,” she wrote in a June report.

A couple of third of meals manufacturing prices are energy-related, Service mentioned. Fertilizer particularly may be very energy-intensive to provide and costs have soared since final 12 months.

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