Rice production – Rice on the rise

• We expect that rice prices likely under upward pressure following supply compression and India new export policies.
• Vietnam is well-positioned to ride on the rice prices uptrend.
• LTG, PAN and TAR should be added into watchlist under this theme.

Rice prices soar as India restricts rice exports

On Sep 08, 2022, India banned the export of broken rice (accounting for 11% of total exports) and imposed a 20% tax on other varieties (except basmati and parboiled rice) (accounting for 18% of total exports). India exports rice to more than 150 countries and contributes about 36.7% global rice trade, thus any reduction in its shipments would increase upward pressure on rice prices.

Global rice supplies at risk as harsh weather hits top exporters

The recent harsh weather in top rice exporter countries in Asia, which accounts for about 90% of the world’s rice output, is likely to curb the yields and definitely reduce the production volume this year. China, the world’s largest rice consumer, has experienced serve draught across 7 provinces which might cut the country‘s rice production and is expected to lift rice imports to a record 6m tonnes in 2022/23. According to U.S. Department of Agriculture, global inventories have fallen to a 4-year low as the FY2022-23 stock-to-use ratio (inventory-to-consumption ratio) is forecasted at only 34.4% (compared to an average of 36.6% for the period of 2018-2022).

Vietnam is well-positioned to ride on the rice prices uptrend

Vietnam is the world third largest rice exporter, behind India and Thailand, with about 7.8% global trade; and the largest exporter to China with 24.5% market share. With higher duty, Indian rice price will become uncompetitive and likely prompt buyers to shift towards Thailand and Vietnam. Thailand Government is seeking for solutions to support its farmers in the context of hike input cost. In 2021, the total rice export value of Vietnam and Thailand accounted for 20.6% of total global trade.

Watchlist under this theme includes LTG, PAN, and TAR

We prefer LTG, PAN, and TAR as they are large exposure to rice export, and will likely benefit from the rice prices upturn.

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