Brace yourselves for high rice prices – warns a report

Fitch Ratings report points to significant surge in rice prices in Kenya

Kenyans will witness a surge in rice prices in the coming weeks following a report by Fitch Rating released on July 10, which indicated a significant reduction in the production of the commodity by the world’s largest producers.

‘Heavy rains in China’s grain-producing region that will reduce yields is likely to put pressure on already high global rice prices’, reads in part a report by Fitch Ratings.

The regions affected by the floods produce 23% of the country’s production, making it a major contributor to the total annual country and thus global rice production.

In the year 2022/23, China produced 147 million metric tons of rice against consumption of 155 million metric tons, making it a net importer of the commodity. China may therefore need to look to import more rice if the anticipated shortfall is anything to go by, thus driving the global rice prices even higher.

On July 20th, India banned non-basmati white rice exports as the government tackle soaring domestic food inflation. India is the second largest rice producer accounting for over 124 million metric tons as at 2022/23 as per the World Rice Production Report, against a consumption of 108 million metric tons for the period year.

This will therefore aggregate the problem further pushing the global prices higher. To worsen the situation, Thailand being one of the largest rice producers, with a production of over 20 million metric tons for the period, has been grappling with dry weather conditions forcing the government to advice farmers to plant less rice to save on water.

Globally, rice is the second staple food with 16.5% consumption after maize which stands at 19.5%, while wheat comes third with 14%.

In Kenya however, rice is the third most consumed commodity after maize and wheat. Kenya unfortunately cannot meet its consumption demand of all its top three staple food with importation as the only option to bridge the deficit.

According to KNBS, Kenya produced 192,299 metric tons of rice paddy last year an increase by 3.4% from the previous year fueled by increased land under cultivation from 32,028 to 44,255 hectares in 2021/22.

The Country imported 630,910 metric tons valued at Ksh.31.14 billion to help bridge the annual consumption gap for the year – reads the Economic Survey 2023.

Mwea Irrigation scheme accounted for 71.6% of production having 137,769 metric tons of the commodity for the year, a reduction from the previous year of 148,670 metric tons due to drought that hit the region.

Consequently, Bura and Tana irrigation schemes recorded exceptional increases in productivity for the period compared to the previous year.

Other irrigation schemes in the country include Ahero, Bunyala, West, South and North Kano and the Lower Kinja recorded slight growth in production compared to the previous year.

To improve in rice productivity, Kenya’s policymakers have deliberately made efforts to increase the production to 1,290,000 tons by 2030 – according to the National Rice Development Strategy-2 2019-2030.

With the easing inflation in the month of July at 7.3%, majorly driven by food prices specifically vegetables, this gain may be drained in some months to come due to the anticipated rise in the price of rice.

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Murungi Ndai

Mr. Ndai is an experienced public sector economist, experienced in sub-nationals having greatly influenced development of policies relating to revenue mobilization by Counties Governments. He collaborates with the private sector, governments and NGOs to address critical topics, including county growth strategies, borrowing and leasing by counties, MSME support and public finance management.
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