Rice supply seen tightening as Iran war and El Niño raise pressure on Asian growers

BANGKOK: Global rice supplies are expected to come under pressure this year as farmers across Asia reduce planting areas and cut input use because of fertiliser shortages and higher fuel costs linked to the Iran war, while an emerging El Niño is also likely to weigh on production.

Rice remains a key pillar of food security worldwide, and even limited disruptions in supply can affect multiple countries by pushing up prices and increasing pressure on household budgets, especially in price-sensitive markets across Asia and Africa.

The UN Food and Agriculture Organisation (FAO) had forecast in April that rice production in 2025/26 would rise by 2pc to a record level. However, growers and traders said the effects of the Iran war are now being felt in major exporters Thailand and Vietnam as well as in import-dependent countries such as the Philippines and Indonesia.

The conflict has disrupted fuel and fertiliser flows through the Strait of Hormuz, a major maritime chokepoint linking the Gulf with international markets. At the same time, Southeast Asia’s predominantly smallholder farmers are facing added strain as El Niño is expected to bring hotter and drier weather to the region in the second half of the year.

“Farmers have already started planting rice in some countries and are using fewer inputs because prices have gone up,” said Maximo Torero, chief economist at the UN FAO.

“We are going to see a tighter global supply situation in the second half of the year and early next year.”

Past episodes have shown how quickly the rice market can tighten. In 2008, export restrictions by major suppliers pushed prices to around $1,000 a metric ton, more than double previous levels, and unrest followed in several countries. More recently, tight supplies in 2022 and 2023, worsened by India’s export restrictions, lifted prices and triggered panic buying.

Supply chain and planting pressures

Rice trade is already facing logistical difficulties. A Singapore-based trader at a leading global rice merchant, who was not named because they were not authorised to speak to the media, said transport and packaging constraints had become severe.

“Logistics have become a nightmare, especially in Asia as there is a shortage of polypropylene bags, limited truck availability to move rice to ports and shipping itself has been disrupted,” the trader said.

Shortages of fertiliser and dry conditions are already reducing yields in smaller crops now being harvested in Southeast Asia, while the next crop may face a sharper decline. India, Thailand and the Philippines sow their main crops in June and July, while Vietnam and Indonesia are planting their second-season crops. Most Asian producers harvest two or three rice crops each year.

Farmers cut input use

In Thailand, Sripai Kaew-Eam, a 60-year-old farmer in Chai Nat province, around 151 kilometres north of Bangkok, said rising fertiliser and fuel prices had increased production costs to about 6,000 baht per rai, equal to 0.4 acre, from around 4,500 to 5,000 baht in the previous crop. She said the price she receives for unhusked rice is about 6,200 baht per metric ton.

She added that fertiliser prices had climbed to 1,000 to 1,200 baht per bag from 850 baht, forcing her to halve usage.

“Fertiliser prices are high, fuel prices are high,” she said.

In the Philippines, the world’s largest rice importer, Arze Glipo, executive director of the Integrated Rural Development Foundation, said some farmers were considering not planting at all or reducing fertiliser use, which would lower output.

“Some farmers are now saying they may not plant or will reduce fertiliser use, which would inevitably cut production,” Glipo said.

She said the country’s production could decline by as much as 6 million tonnes from its usual 19m to 20m tonnes.

“That would leave the Philippines in a precarious position, as imports are also uncertain due to export restrictions, making it extremely difficult to cover any production shortfall,” Glipo said.

In Indonesia, fertiliser availability is not the main issue, but El Niño is expected to reduce output. The country’s statistics bureau has estimated that rice harvest area in the March-May period will fall 10.6pc to 3.85m hectares, while unhusked rice production will decline 11.12pc to 20.68m tonnes.

Despite these concerns, global inventories remain substantial after several years of strong harvests. US Department of Agriculture data shows that India, the world’s largest rice exporter, holds a record 42m tonnes, or roughly one-fifth of global stockpiles, which could cushion any decline in world production.

Most rice grades are currently trading at stable levels, but Torero said prices are still likely to rise even if the Strait of Hormuz situation is resolved immediately.