Global Rice Prices Remain Elevated Due to El Nino Impact on Production

Global rice prices are currently near a two-year high, driven by concerns that the ongoing El Nino weather phenomenon is impacting crop production in major exporting nations. Export offers have increased by $20 a tonne from India and Pakistan, and by $30 from Thailand and Vietnam since July.

According to the Agricultural Marketing Information System (AMIS) of the UN’s Food and Agriculture Organisation (FAO), rice is among the crops most negatively affected by El Nino. A large share of global rice production is concentrated in South and South-East Asia, regions that typically experience reduced rainfall during these weather events. AMIS projects a 2.4 percent fall in global rice production for the 2026-27 season, down to 552.47 million tonnes.

The ongoing El Nino has affected paddy crops across India, Pakistan, Thailand, Indonesia, Vietnam, the Philippines, and Malaysia. The US Department of Agriculture has forecast Indian production at 147 million tonnes, down 4.6 percent year-on-year, while Thai output is expected to fall by 1.9 percent to 20.3 million tonnes due to lower plantings and government water conservation efforts. Additionally, Trading Economics reported that flooding in Thailand has disrupted rice transportation and raised concerns over potential planting delays.

Financial institutions and research agencies have adjusted their market forecasts in response to these conditions. Research agency BMI, a unit of Fitch Solutions, revised its 2026 annual-average price forecast for CBOT-listed second-month rice futures from $12.9 to $14 per hundredweight, following strong price momentum through the third quarter. Prices averaged $15 per hundredweight in the third quarter and climbed to a 29-month high of $17.8 in October. BMI expects prices to average $17.5 in the fourth quarter of 2026 before moderating to $7.2 in the first quarter of 2027 as the US harvest advances and Asian monsoon crop outcomes become clearer.

At the same time, BMI noted a widening divergence between futures and physical export-price indicators. The research agency suggested that futures are pricing in a substantially larger prospective supply-risk premium than is currently evident in physical markets, noting that conditions in the global physical market remain relatively stable with little evidence of a material supply shock. CFTC data indicates that speculative positioning has strengthened, with net long positions rising since mid-July.

Other market pressures include higher freight and insurance shipping expenses, alongside stronger demand from African nations. Rabobank and ING Think have also highlighted that El Nino poses significant stress to global rice supplies, production, and trade flows. However, BMI pointed out that as harvesting proceeds across the main monsoon crops of key exporters like India and Thailand, exposure to further El Nino-related disruptions is progressively diminishing.

"The agricultural sector remains deeply vulnerable to climate patterns like El Nino, which directly impact commodity prices, supply chains, and export dynamics across Asia. For businesses operating in food processing, retail, and supply chain logistics, these weather-driven cost fluctuations highlight the importance of robust risk management and diversified sourcing strategies. As forecasts point toward elevated prices well into 2027, companies must closely monitor inventory levels and margin pressures to navigate ongoing market volatility effectively." — Dr. Shishir Gupta, Founder & CEO, StartupLanes