El Nino may keep global rice prices elevated until Q1 2027
Global rice prices are expected to remain elevated through Q1 2027 as El Niño threatens production across South and Southeast Asia. FAO forecasts a 2.4% decline in 2026-27 output to 552.47 million tonnes, while BMI raised its 2026 CBOT rice futures forecast to $14/cwt.
Rice prices in the global market will likely remain elevated during the current quarter and the first quarter of 2027 amid fears that the current El Nino is affecting production.
“…Rice is among the crops most “negatively affected”, where a large share of the world’s rice production is concentrated in South and South-East Asia, which typically endures reduced rainfall during El Niño events,” said the Agricultural Marketing Information System (AMIS) of UN’s Food and Agriculture Organisation (FAO).
“We are revising our 2026 annual-average price forecast for CBOT-listed second-month rice futures from $12.9/cwt (hundred weight equalling 45.36 kg) to $14, following stronger-than-expected price momentum through Q3 2026,” said research agency BMI, a unit of Fitch Solutions.
Price outlook
Prices during the current quarter are expected to average $17.5 in Q4 2026 and $7.2 in Q1 2027. As outcomes for the larger Asian monsoon crop become increasingly clear through Q4 and the US harvest advances, there is scope for CBOT-listed futures to correct from current levels of above $17.6, it said.
Rice prices are near a two-year high currently, with export offers increasing by $20 a tonne from India and Pakistan and $30 from Thailand and Vietnam since July.
AMIS projected a 2.4 per cent fall in rice production in the 2026-27 season at 552.47 million tonnes (mt).
The ongoing El Nino has affected the paddy crop in India, Pakistan, Thailand, Indonesia, Vietnam, the Philippines and Malaysia.
4.6% drop in Indian output
The US Department of Agriculture has forecast Indian production at 147 mt, down 4.6 per cent year-on-year. The estimate is lower than earlier projections of 150 mt, providing additional support to prices since September.
It said that Thai output is expected to fall by 1.9 per cent year-on-year to 20.3 mt, amid lower plantings and government efforts to encourage acreage reductions as a precaution against reduced water availability.
ING Think, the financial and economic analysis wing of Dutch multinational financial services firm ING, said rice production across South and South-East Asia faced risk due to El Nino.
Another Dutch multinational financial services firm, Rabobank, said El Niño poses significant stress to global rice supplies, production, and trade flows through the Q4 and Q1 2027 window.
Historical patterns
AMIS said that using 2020-2024 average values as expected production levels, El Niño years have been associated with an average shortfall of approximately 9.6 million tonnes of paddy. This is equivalent to about 1.2 per cent of expected global production.
“Although El Niño is not the sole determinant of rice production, these historical patterns provide an indication of the direction and potential magnitude of production risks associated with the phenomenon,” it said.
Trading Economics website said flooding in Thailand has disrupted rice transportation and raised concerns over planting delays and potential crop losses. The risk of a strengthening El Niño adds further uncertainty to production prospects.
BMI said prices averaged $15.0/cwt in the third quarter and subsequently climbed to a 29-month high of $17.8 in October, reflecting strengthening El Niño-related risk sentiment alongside tighter US supply conditions.
“Importantly, we do not believe the magnitude of the ongoing strength in CBOT-listed rice futures signals a comparable deterioration in global physical market conditions, with the widening divergence between futures and physical export-price indicators suggesting that futures are pricing in a substantially larger prospective supply-risk premium than is currently evident in physical markets,” it said.
Conditions more stable
Speculative positioning points to strengthening near-term market sentiment. CFTC data show net long positions rising since mid-July, exceeding 1,000 contracts through September and 2,000 contracts in October as long positions increased and short positions declined, said the research agency.
“Overall, we believe conditions in the global physical market remain considerably more stable than the recent move in CBOT-listed futures would suggest, with little evidence that a material supply shock has emerged,” it said.
Trading Economics said higher freight and insurance costs are also increasing shipping expenses, while stronger demand, particularly from African countries, is adding to pressure on the global rice market.
BMI said that with harvesting underway or approaching across the main monsoon crops of key exporters, particularly India and Thailand, exposure to further El Niño-related disruption “is progressively diminishing”.
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Source : The Hindu Businessline
