(Bloomberg) -- Rice prices are climbing, a sign that the food inflation shock that threw millions into poverty is still reverberating, even as the cost of wheat and other farm commodities has declined.
Thai rice, a benchmark for Asia, has soared to the highest in almost two years. Strong demand lies at the heart of the rally, with some importers buying more of the grain to replace wheat after the war in Ukraine disrupted supplies. Some consumers have also been stocking up ahead of festivals, while a strengthening Thai currency has also helped to push up dollar-denominated prices.
Rice is a staple for half the world, and while wheat soared to a record in March last year, rice was relatively subdued for most of 2022, constraining food inflation in Asia. Costlier rice now will be unwelcome news for billions of people from China to India and Vietnam. The United Nations has flagged the rise in prices as a risk, saying it's important to stay vigilant on food security.
Thailand, the second-biggest rice shipper, has seen strong demand from Iraq and Indonesia, said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association. “Iraq has been diligently buying our rice every month,” he said. The Middle Eastern country was the single largest buyer last year.
But as Thai rice prices get more expensive, new orders have started to slow. Buyers in China and Malaysia are switching to cheaper options, and prices may start easing around March when the new crop hits the market, Chookiat said.
Even then, the Thai price would be higher than a similar Vietnamese grade, he said. The Thai benchmark was last quoted at $523 a ton, the highest since March 2021. Vietnam prices were more than 10% cheaper at about $458-$462.
The association cut its forecast for Thailand's rice exports this year to 7.5 million tons from 8 million, according to Chookiat. Shipments reached 7.7 million tons last year, the highest in four years, according to preliminary data.
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