Thai Export Slowdown Meets El Niño Risk: Rice Market on a Knife Edge

Thai rice faces a tightening balance as exports drop 12% year-on-year while drought and El Niño risks threaten upcoming production, keeping a firm floor under international prices. Global rice trade is being reshuffled. Thailand is shipping less to the Middle East amid geopolitical disruptions, while demand from Africa and Asian importers seeking food security is rising. At the same time, Thailand’s new crop faces mounting weather and input-cost risks, with below-average monsoon rains and low water reserves in the Chao Phraya basin. Against this backdrop, export quotations from India and Vietnam remain broadly stable in late June, but the risk profile for Q3–Q4 is clearly skewed to the upside as El Niño strengthens and buyers in vulnerable regions look to secure supplies.

Prices

FOB offers in India and Vietnam have been broadly sideway in June, but well above pre-crisis levels, reflecting structural tightness rather than acute panic. Indian non-basmati steam grades in New Delhi remain around EUR 0.31–0.66/kg equivalent, with PR11 steam near EUR 0.31/kg and premium 1121 steam close to EUR 0.65–0.67/kg, showing little change over the month. Vietnamese long white 5% and jasmine types in Hanoi are quoted roughly in the EUR 0.32–0.37/kg range, also largely stable since mid-June.

Indicative benchmark 5% broken export references for Vietnam and India point to a soft but not collapsing price environment, with modest easing earlier in the year on weak spot demand and comfortable inventories. However, Thailand’s export slowdown and emerging drought signals are starting to cap further downside. With buyers in Africa and parts of Asia increasing coverage due to food security concerns and the looming El Niño, the market is transitioning from a calm, well-supplied phase into a more risk-aware pricing regime for late 2026.

Supply & Demand

Thailand’s rice exports fell 12% year-on-year to about 2.2 million tonnes in January–April 2026, valued near USD 1.25 billion, as geopolitical disruptions sharply reduced shipments to Iraq and other Middle Eastern buyers. This loss of high-margin demand has partly been offset by stronger buying from Malaysia, the Philippines, South Africa, Angola and Mozambique, where governments worry about food security under El Niño conditions and are front-loading imports.

On the supply side, Thailand’s 2026/27 crop outlook is becoming more fragile. Although the monsoon season officially began in mid-May, rainfall has so far stayed below the 30‑year average, and usable water reserves in the key Chao Phraya basin are only about 36% of capacity, raising drought concerns for June–July, especially for rainfed areas. Lower nitrogen fertilizer imports, down around 20% year-on-year in January–April, add another layer of risk to potential yields and quality as farmers may cut application rates.

Globally, the immediate balance is cushioned by high stocks, including record reserves in major producers, but El Niño is now forming and historically tends to weaken monsoon rains across parts of South and Southeast Asia. As a result, physical availability in the next marketing year could tighten just as demand from weather-vulnerable importers in Africa and Asia rises, turning the current Thai export slowdown into a more systemic supply constraint if yields disappoint.

Fundamentals & Weather

Fundamentals around Thailand hinge on three key stress points. First, water: the reported 36% storage level in the Chao Phraya system, combined with expectations of below-normal monsoon rainfall, implies reduced irrigation flexibility and elevated drought risk for off-season rice and marginal areas during June–July. Second, inputs: the 20% decline in nitrogen fertilizer imports in early 2026 is likely to curb application rates, especially among smaller farmers, which could translate into lower yields and grain quality for the upcoming crop.

Third, climate: scientific and operational forecasts now consistently point to a strengthening, potentially severe El Niño in the second half of 2026, historically associated with hotter, drier conditions in key rice belts of Thailand, Vietnam, India and parts of Southeast Asia. While current field reports still describe generally favourable conditions for early-season rice in much of Southeast Asia, the risk profile for late 2026 and early 2027 harvests is deteriorating. This combination means that even modest weather shocks could quickly tighten exportable surpluses.

At the same time, some large producers hold ample stocks, which may buffer extreme outcomes but not fully offset a concurrent regional production hit. Rising demand from African and Asian importers seeking to pre-empt El Niño-related food inflation further underpins the market. For now, the global rice complex sits in a fragile equilibrium: comfortable inventories on paper but increasingly exposed to synchronized climate and input-cost shocks centred on Thailand and its neighbours.

Short-Term Outlook & Trading View

Over the next few weeks, Thai weather and Middle East geopolitics will remain the key swing factors. If monsoon rainfall fails to recover meaningfully by late July, markets are likely to price in a tighter Thai exportable surplus for the 2026/27 cycle. Conversely, any improvement in water levels or a partial normalization of logistics into selected Middle Eastern destinations could briefly soften sentiment, although the broader El Niño narrative will keep risk premiums alive.

For now, Indian and Vietnamese FOB indications suggest that buyers have time to manage coverage, but the window for cheap nearby cargoes is narrowing as more importers in Africa and Asia move from “wait and see” to proactive stock-building. Given the asymmetric risk to yields and the structural importance of Thai supply, the balance of probabilities for Q3–Q4 points to mildly firmer prices with spikes possible on any weather or policy shock.

• Importers (Africa, Asia): Gradually extend coverage for Q4 2026–Q1 2027 while prices remain stable; prioritize diversification between Thai, Indian and Vietnamese origins to mitigate origin-specific drought or policy risk.
• Exporters (Thailand): Consider locking in forward sales on weather-induced rallies, but retain volume flexibility given production uncertainty and potential logistical constraints in key markets.
• Traders & Investors: Bias moderately long in high-quality Asian white rice benchmarks, using weather and policy headlines as entry points; guard against downside via options or cross-hedges with other grains given high global stock buffers.

3-Day Directional Price Indication (EUR)

• India, New Delhi FOB (non-basmati steam grades): Sideways to slightly firm (±1–2%) as export demand slowly improves but stocks remain ample.
• Vietnam, Hanoi FOB (white/jasmine): Largely sideways (±1%) with steady export programs and watchful stance on regional weather.
• Thailand, benchmark 5% broken (implied in EUR): Mild upside bias (up to +2%) as markets digest lower exports, weak monsoon signals and growing El Niño concerns.