Is the price of rice about to rise?

on Mar 14, 2020
Updated: Apr 3, 2020
  • The current price of rice is probably too low.
  • Huge worldwide demand that is only going to grow as population increases.
  • Offers diversity when stiock market is in turmoil.

Rice is one of the most important and widely consumed foods on the planet. It is a staple food item in numerous countries across the world, particularly in Asia, Latin America, and Africa.

As an investment commodity, rice is highly volatile. This is due to the number of factors that influence the price, with the weather being among the most important of them. Bearing all of that in mind, what are the chances of the price of rice in the market rising soon?

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The current price situation  

It is impossible to look at any commodity right now without taking into account the coronavirus effect. One of the big issues has been a slowdown in global shipping numbers. A record number of 2 million shipping containers were lying empty at the end of February.

Rice hasn’t suffered as badly as some other commodities in this respect. This may be partly due to the fact that large quantities are consumed close to where it is produced. All of the countries that produce most rice are also those that consume most. These are all in Asia, the likes of India, China, Indonesia and Thailand.

At the time of writing, the price of rice is at $US 13.02 (£10) per cwt. This is down from a recent high of $13.90 at the start of February. Before this, it had gone on a long climb from as low as $11.84 back in mid-November.

What happens next?

The global nature of this commodity makes it difficult to predict the future price. If we take the example of Nigeria, recent reports suggest that the government wants to make them self-sufficient and stop importing rice. As this is a huge country of over 200 million with a dependence on imported rice, this move would affect the international market.

Another recent report from Arkansas in the US points out that new seed varieties are being used but that unusually wet weather is stopping farmers from getting started on planting this year. If we go around the world like this we get a fragmented picture of positive news in some places and negative stories in others.

It is far better to try and get an overall view or the global market. For example, the US trade war with China hurt the rice market last year but it started to recover as the dispute looked to be drawing to a close at the end of the year. US growers are also still looking to re-structure the market to give themselves a better chance of success abroad.

Now, it is coronavirus that is pushing the price down. That is a fairly simplistic way to look at it, buy simply analysing each market and rice-producing area doesn’t give us the details that we need.

Should you invest in rice?

There is no doubt that the idea of investing in commodities is interesting just now. With the stock market in turmoil, this is a way of diversifying in something un-related that can bring good rewards if you get the timing right.

The price of rice looks to be on the low side just now, as the virus outbreak cut short what looked like a strong recovery. The world is going to carry on wanting to eat rice once the health scare is over, though. There is even a chance that it enjoys a boom period as the world returns to normal.    

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