Naveen Thakral

SINGAPORE (Reuters – An increase in the price of wheat and corn is driving up demand for low-grade, staple rice across Asia. At a moment when food prices are at an all-time high, this is causing prices to rise.

Following Russia’s invasion in Ukraine, world crop importers are now scrambling to get supplies. These two countries account for approximately 25% of global wheat production and 16% of worldwide corn exports.

Chicago wheat futures hit an all-time high, and corn reached its highest point in over a decade following the closure of ports by war-torn Ukraine and Western sanctions on Russian exports.

Buyers began to look for alternatives after the price rises of wheat and corn. China is by far the largest global feed market. Analysts and traders said that there is an interest in buying additional volumes of broken rice. This inferior rice has been milled through the cracking process and can be used to feed hogs or other animals.

Rice is usually traded at a high premium over wheat. However, wheat’s dramatic 50% price rise from one month ago has drastically reduced the gap between them and made wheat even more costly than other lower grade rice.

Global food prices hold near all-time highs after surge in edible oils and cereals https://fingfx.thomsonreuters.com/gfx/ce/jnpwebdmypw/FAOOndexMar2022.png

On the back of stronger food demand and an increase in rice quality, benchmark food grade rice exported from Thailand saw its highest weekly gain since October 2020. It rose 5% to approximately $421.50 per ton.

This is the highest price since June last year, but sources warn that prices could continue to rise if disruptions in the Black Sea flow are not resolved. The export prices for India and Vietnam have also increased.

Shirley Mustafa (Rome-based FAO Rice economist) said, “There might be more interest for broken rice as animal feed if strength currently dominating the wheat and corn market persists.”

It isn’t just for animal feed. There could be an alternative in other sectors such as people switching to rice to get their food.

Global rally in wheat and corn spurs increased feed demand for rice https://fingfx.thomsonreuters.com/gfx/ce/zgvomzxorvd/WheatCornRiceinUSD.png

CORN CUT

China was able to book up to 2 million tonnes of Ukrainian corn imports in this year’s China, but many of those shipments now face serious risk due to the disruption in Ukraine’s logistics chains.

China expects to import three million tonnes of rice broken every year, an increase from the two-million tonnes in two years ago.

A Guangdong importer wants to purchase broken rice from Thailand. Others have bought Indian-broken rice recently for feed according to another source.   

Due to higher corn prices, Indian rice exporters have seen a greater demand. Reuters spoke with B.V. Krishna Rao of India’s Rice Exporters Association.

The prices for 100% Indian broken rice are now at $320 per ton, up from $290 last February.

Thailand’s feed manufacturers are looking to use more rice broken than corn in order to support rice prices. This is according Bangkok-based traders.

According to one Bangkok trader, “There has been a significant increase in demand from Thailand for rice of lower quality.” “In fact, most Thailand’s cracked rice will likely be consumed on the domestic market.”

FOOD FEARS

According to Chookiat Ophaswongse (honorary president, Thai Rice Exporters Association), global rice prices may rise even more in the second quarter due to rising domestic wheat prices. This would increase any drop in rice inventories.

Global rice stocks are expected to reach a record high of 190m tonnes this year. However, the U.S. Department of Agriculture predicts that global rice production will exceed global consumption by just 5 million tonnes in 2022. This means that a rapid rise in global demand may quickly deplete these inventories, and strengthen bullish sentiment within the market.

A rise in rice prices, in turn, will increase food security fears for the poorest countries in Africa and Asia. Many rely on this staple to survive.

A Singapore-based grain trader stated that while broken rice currently serves the feed industry, as war escalates and buyers become unable to obtain adequate wheat, food security will be a concern.

“Buyers will try everything to replace costly wheat with rice, or any other alternative.”