Rice Futures Hit 14-Month High as El Nino Risk and Geopolitical Tensions Offset Record Inventories

CBOT rough rice futures closed at $14.31 per hundredweight on July 22, gaining 0.67% on the day and extending a rally that has pushed prices 11% higher over the past month. This is the highest level since February 2025, according to Trading Economics data. The FAO All Rice Price Index rose 3.2% month-over-month in June, reaching its highest since January 2025, driven by strengthening Asian demand for Indica rice and concerns over El Nino effects on the upcoming 2026/27 crop season.

The rally has a dual engine. On the supply side, El Nino conditions flagged in the July 2026 NOAA El Nino Advisory are raising concerns across key growing regions in Southeast Asia. The AMIS Market Monitor July 2026 report notes that El Nino's emergence is the main forward risk for rice and tropical crops in the second half of 2026. On the geopolitical side, renewed tensions in the Middle East have increased concerns over possible disruptions to commodity shipments through the Strait of Hormuz, through which a significant portion of global grain trade transits. The International Monetary Fund flagged Hormuz risk for global growth in its July 2026 World Economic Outlook Update.

However, the rally sits atop a mountain of supply. Global milled rice inventories reached a record 196.2 million tonnes at the start of 2026, according to Trading Economics. India's rice stocks alone stand at an all-time high of 68.4 million tonnes as of June 2026. Indonesia, a major importer, is holding record stockpiles as farmers accelerate planting to mitigate El Nino risks. Thailand's inventories are at their highest in a decade, with fresh second-crop arrivals expected from late July. The USDA WASDE May 2026 report projects global ending stocks at 192.7 million tonnes for 2026/27, down only modestly from the record.

The International Grains Council (IGC), in its July 16 Grain Market Report, noted that its rice price index fell 1% from the prior month, mostly reflecting weakness in Thailand, where 5% broken white rice export prices fell by USD 31 to USD 450 per tonne FOB Bangkok, pressured by the upcoming off-season harvest and subdued international demand. Meanwhile, Vietnam's 5% broken rose by USD 8 to USD 420 per tonne, and Pakistan firmed by USD 9 to USD 414 per tonne, as tighter supplies supported prices at both origins. India's parboiled quotations increased by USD 14 to USD 355 per tonne, boosted by recent sales to West Africa and mounting worries about deficient monsoon rains.

India remains the dominant force in global rice trade, accounting for roughly 40% of exports. After lifting its 2023 ban on non-basmati white rice exports in late 2024, India imposed a minimum export price of USD 490 per tonne. The country is sitting on surplus, according to the Rice Exporters Association Chhattisgarh, and Indian offers at USD 350-355 per tonne for 5% broken white rice are well below Thai and Vietnamese competitors. This competitive pressure is the primary cap on global prices.

The 2026/27 production outlook is for a slight contraction. AMIS forecasts the 2026/27 rice crop at 552.4 million tonnes, roughly 10 million tonnes below 2025/26. The IGC projects world rice output to decline by about 1% year on year due to smaller crops in Asia and the Americas, while consumption is forecast to rise 1% on increased food demand in Asia and Africa. Global stocks are projected to fall 2.7% from their record high as utilization peaks.

Vietnam exported 5.2 million tonnes worth USD 2.38 billion in the first half of 2026, up 9.9% in volume but down 2.5% in value versus the same period in 2025, reflecting lower prices. Le Thanh Tung, Vice Chairman of the Vietnam Rice Industry Association, said global rice demand in the second half is expected to be broadly stable, though El Nino could affect production in several Southeast Asian countries.

Analyst views diverge on the near-term direction. Trading Economics notes that while futures have rallied above USD 14/cwt, global rice stocks remain abundant after successive strong harvests, limiting sustained price spikes. The IGC and FranceAgriMer view the 2026/27 global balance as broadly stable and comfortable. Commercial analysts at Commodity Board and MillingMEA expect modestly softer FOB prices in late 2026 as surplus exporters compete aggressively. On the other side, the AMIS Market Monitor and FAO flag El Nino risk and elevated production, transport and marketing costs as upside price risks.

The bull case centers on weather: El Nino intensifying into the Asian growing season could reduce yields in Thailand, Vietnam, and India simultaneously, drawing down inventories for the first time in years. The bear case is the weight of stock: with India holding 68.4 Mt and Thailand at decade-high levels, any production shortfall is easily absorbed by releasing government stocks. The base case is sideways to slightly lower FOB prices, with CBOT futures remaining elevated near USD 14/cwt on risk premium.

Thailand's export competitiveness is suffering from a strong baht and relatively high domestic prices. USDA projects Thailand's 2026 exports trimmed for this reason, even as global rice trade is forecast to reach a record 62.8 million tonnes (milled basis), up 3.1 million tonnes from 2025. The USDA projects increased exports from Thailand (7.4 Mt, +6%), Pakistan (5.0 Mt, +10%), and Vietnam (8.9 Mt, +2%).