Asia faces a ‘rice crisis’ but China and India may escape the worst price rises, analysts say

Record fertiliser prices sent higher by market turmoil and supply shortfalls amid the war in Ukraine are driving up the cost of farming rice

Analysts say top producers China and India are insulated from the worst effects – as Indonesia’s president warns of a crisis that might affect 2 billion people

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Farmers prepare paddy fields to grow rice in Bogor, Indonesia, last month. Photo: EPA-EFE

Published: 2:00pm, 10 Jul 2022

Rice prices are heading upwards, world food experts have warned, as soaring fertiliser costs look set to weigh on yields of a crop that’s a staple for at least 2 billion people across Asia.

Four years of plentiful harvests had largely kept rice affordable, but with natural gas – a key ingredient in most fertiliser production – trading at historic highs in the wake of the Russia-Ukraine conflict, both the UN food agency and World Bank now forecast rising prices.

“It’s now inevitable. Prices will go up,” said John Baffes, senior agriculture economist at the World Bank’s Development Economics Prospects Group. “Rice was the exception, but not any more.”

An Indonesian farmer spreads fertiliser on a rice field last month amid planting season in Aceh. Photo: EPA-EFE

Natural gas is the primary feedstock used by all major fertiliser producers except China – which uses coal – to manufacture the ammonia that about 80 per cent of fertilisers are made from globally.

Russia, Ukraine and Belarus were major exporters of nitrogen-based fertilisers before the war, but the combined effect of the conflict and soaring gas prices has hit exports from all three nations. Nitrogen-based fertilisers are now trading at prices last seen in 2008.

“This is a huge worry for the global market, Asia in particular,” said Julia Meehan, managing editor for fertilisers at London-based market analysts Independent Commodity Intelligence Services.

“The high cost of gas has created demand destruction – so we are seeing curtailments in production, in addition to some producers choosing to halt production altogether.”