Rice Market Tightens as Thai Exports Drop and Weather Risks Mount

Thai rice exports have fallen sharply in early 2026 as conflict‑related shipping disruptions in the Middle East collide with rising production risks at home, keeping global rice fundamentals tighter than headline price levels might suggest. The international rice market is entering the second half of 2026 with an unusual mix of constraints. Thailand, a key benchmark exporter, saw a 12% year‑on‑year export decline in January–April as lost business to Iraq and other Middle Eastern buyers could not be fully offset by stronger African and Asian demand. At the same time, below‑normal rainfall and rising fertiliser costs are tightening Thai production margins just as El Niño‑related weather uncertainties build across South and Southeast Asia. Indian and Vietnamese FOB quotations remain relatively soft but are edging higher, suggesting downside for prices is limited if Thai supply tightens further.

Prices

Spot export offers from India and Vietnam remain contained but are gradually firming. Converting the latest quotes to EUR (using an indicative 1 USD ≈ 0.92 EUR), mainstream Asian white and parboiled rice grades cluster around EUR 300–750 per tonne FOB, with modest week‑on‑week gains indicating that earlier downside momentum is fading.

Against this backdrop, benchmark Thai quotes are under upward pressure from higher freight and insurance costs on longer routes, particularly to the Middle East, even as buyers in Southeast Asia and Africa seek competitively priced supplies. With Thai exports already down 12% year on year in the first four months, the global market is likely to price in a risk premium for high‑quality grades if production or logistics tighten further.

Supply & Demand

Thailand exported around 2.2 million tonnes of rice in January–April 2026, valued at roughly USD 1.25 billion, marking a 12% drop from the same period a year earlier. The main drag came from the Middle East, where conflict and the closure or risk premium around critical shipping lanes disrupted flows to Iraq and other core destinations, eroding Thailand’s traditional market base.

Part of this shortfall has been absorbed by stronger buying from Africa and within Asia. Malaysia, the Philippines, South Africa, Angola and Mozambique have stepped up purchases, in some cases pre‑emptively building stocks in response to El Niño concerns. This re‑routing of trade underpins Thai utilization but does not fully replace lost Middle Eastern demand, leaving export volumes structurally lower while logistics risks remain elevated.

Globally, USDA trade assessments for 2026 still point to comfortable but not excessive exportable surpluses, with India, Thailand and Vietnam anchoring world supply. However, ongoing freight disruptions and war‑risk insurance surcharges on Middle Eastern routes are effectively reducing available supply at competitive prices, particularly for buyers dependent on longer shipping distances.

Fundamentals & Production Costs

Thailand’s domestic production environment is turning more challenging. Although the monsoon season officially began on May 15, May rainfall stayed below the 30‑year average, and water storage in the crucial Chao Phraya basin was only about 36% of capacity, raising concerns about irrigation sufficiency through June and July. These concerns are amplified by forecasts of hotter and drier conditions linked to a developing El Niño phase in 2026, which historically tends to depress rainfall over parts of Southeast Asia.

Input costs are adding further pressure. Nitrogen fertiliser imports into Thailand became more expensive and volumes fell by around 20% year on year in January–April. Limited availability and higher prices are squeezing farm margins and may lead to reduced input application, with negative implications for yields and quality in upcoming crops. In combination with water constraints, this raises the probability that Thai exportable surpluses in late 2026 and into 2027 could undershoot earlier expectations.

For global fundamentals, that means the market is balancing solid near‑term availability against rising medium‑term production risks in a key origin. If El Niño‑related dryness extends or intensifies into other major producers, the current period of relatively moderate prices could mark the lower end of the range rather than a new norm.

Weather Outlook

Seasonal climate guidance for Thailand points to a tendency toward hotter and, in many areas, drier conditions than normal during the 2026 wet season, consistent with a strengthening El Niño signal across the Pacific. While short‑lived heavy rainfall episodes are still expected, the overall pattern is skewed toward below‑normal cumulative precipitation in several rice‑growing regions, especially those already reliant on irrigation.

For other key Asian rice producers, early indications also suggest elevated weather risk: forecasts highlight an increased likelihood of drier‑than‑average conditions in parts of Southeast Asia and South Asia as El Niño matures into late 2026. This combination raises the chance of localised yield losses or quality problems, even if severe drought is not yet the base case.

Trading & Risk Management Outlook

• Importers: Consider forward cover for Q4 2026–Q1 2027, especially for Thai and Vietnamese premium grades, to lock in still‑moderate EUR‑denominated values before potential weather‑driven tightening.
• Exporters in India and Vietnam: Use current demand rotation from Thailand to consolidate market share in Africa and Southeast Asia, but maintain pricing discipline given rising production and logistics risks in the region.
• Industrial users and millers: Diversify origin portfolios where possible and monitor fertiliser and water conditions in Thailand closely, as further deterioration could trigger abrupt upward price adjustments.

3‑Day Price Direction (Indicative, in EUR)

• Thailand (benchmark white, FOB): Steady to slightly firmer bias as export supply tightens and freight risk persists.
• Vietnam (5% broken, FOB): Mild upward drift expected, tracking regional demand and Thai risk premium.
• India (parboiled and basmati segments, FOB): Mostly steady with a modestly bullish tone, supported by improving overseas demand and the possibility of weather‑related risk repricing.