Mzansi Agriculture Talk

Business

RECENT SHARP INCREASES IN SA’S RICE PRICE AT RETAILS WILL BE SHORT LIVED

If we think the effect the Covid-19 has on the global market is going to disappear so soon we are up for a huge surprise. Rice is among the most important staple foods in the world and for that reason an increase in prices will always raise eye brows especially for already troubled economies when battling a global crisis. This is precisely the case for South Africa which happens to rely entirely on imports for rice. From the NAMC’s 28-item food basket monthly price tracker, rice prices have been increasing since end of July, however, this will not last long. 

Things got sour when India which is the second largest rice supplier for South Africa announced trade restrictions on rice in fear of food insecurity. With Thailand a leading rice supplier for South Africa recording a historic slow rice shipment adding more pressure, the price increment domestically was in-evitable. On the 1st of September 2020 export rice prices reached US$514 per ton which is far lower when compared to prices seen on the first half of 2008 when prices doubled. 

The question now is, should the general public or policy makers be concerned about these price movements seen in recent weeks, or should decision makers within the policy space intervene? The answer is a simple no; these price fluctuations are temporal for a couple reasons. First, the international Grain Council had forecast a 0.7 million ton cut in the world rice exports in 2020 with Thailand as the main contributor which happens to be largest supplier to South Africa and a major player for premium rice globally, this was bound to negatively affect net-rice importers such as South Africa.  Second, the weakening rand which depreciated from R17.20/US$ beginning of August 2020 to R17.60/US$ on the August 17th 2020 had a negative effect on domestic prices. 

The market will self-correct this volatility based on the following factors. First, Sub-Sahara Africa which is a significant global rice market is showing a weak demand, which can be attributed to dire circumstances in which most economies regionally find themselves in, amid Covid-19 thus negatively affecting global prices. 

Second, the International Grain Council has projected a rebound of 2% y-o-y in global rice production for 2020/21, to a new record of 505 million tons; meaning new supply of rice is coming to the market.

Third, petrol prices are expected to remain stable while diesel prices are expected to decline marginally during September which is likely to positively affect domestic prices.In fact, as of the 3rd of September 2020 a ton of rice from Thailand was selling at US$495, the same price last seen on the 18th of August 2020, this represents a decline of US$19 per ton in two days. Also, export prices in India remain just above average levels while remaining on average levels in Vietnam.

Click to comment

You must be logged in to post a comment Login

Leave a Reply

To Top
Get Notifications For Latest Posts & Events!    Ok No thanks