Thai rice exporters squeezed as logistics shock meets heavy Indian supply

Thai rice is entering a phase of margin compression as sharply higher logistics costs collide with abundant global supply, particularly from India, keeping international prices capped even as exporters’ cost base rises.

Export flows to key Middle Eastern buyers remain active, but competitiveness is deteriorating as freight, insurance and fuel costs jump following the effective closure and partial re‑opening of the Strait of Hormuz amid the Iran war. At the same time, large Indian stockpiles, including vessels already at sea and delayed en route to regional markets, are limiting any upside in benchmark prices and shifting bargaining power towards buyers. For now, the market is better described as tight on logistics rather than tight on physical availability.

📈 Prices

FOB rice prices in India and Vietnam have edged lower over March, underlining that the current shock is cost‑push rather than price‑led on the demand side. Recent offers (FOB, converted roughly at 1 EUR ≈ 90 INR / 27,000 VND) show mild week‑on‑week declines across key grades:

Origin / Type	Location / Term	Latest price (EUR/kg)	1 week ago (EUR/kg)	Trend
India, 1121 steam (all steam)	New Delhi, FOB	~0.83	~0.85	⬇ soft
India, 1509 steam (all steam)	New Delhi, FOB	~0.78	~0.80	⬇ soft
India, non‑basmati white (organic)	New Delhi, FOB	~1.45	~1.47	⬇ soft
India, basmati white (organic)	New Delhi, FOB	~1.76	~1.78	⬇ soft
Vietnam, long white 5%	Hanoi, FOB	~0.43	~0.44	⬇ soft
Vietnam, Jasmine	Hanoi, FOB	~0.45	~0.46	⬇ soft

This modest easing contrasts with the sharp increase in freight and insurance premia for shipments transiting the Gulf, underscoring the squeeze on exporter margins rather than on buyers.

🌍 Supply & Demand

Thailand’s export sector is facing a roughly 15% increase in total export costs, driven by higher bunker fuel prices, elevated freight rates and war‑risk insurance linked to Middle East tensions and the effective closure of the Strait of Hormuz. Shipping advisories and freight surcharges confirm materially higher logistics costs on Gulf‑bound lanes, even as some controlled transits resume under Iranian oversight.

Despite these disruptions, physical rice availability remains comfortable. India holds large stockpiles and currently has around 500,000 tonnes of rice at sea or delayed en route to Middle Eastern markets, adding to short‑term supply in destination ports once congestion eases. This additional Indian volume is capping global price gains and intensifying competition for Thai-origin rice in price‑sensitive markets.

Iraq illustrates these mixed dynamics. It remains a key buyer of Thai rice under its Public Distribution System, where government tenders anchor steady baseline demand. At the same time, Iraq’s private sector relies heavily on Indian basmati and is increasingly price‑sensitive as freight, insurance and local purchasing power constraints bite. Recent steps by Baghdad to tighten eligibility for ration cards highlight the pressure to contain subsidy costs, indirectly reinforcing the focus on cheaper origins.

📊 Fundamentals & Market Structure

Thai rice exports for 2025 are projected at about 7.8–8.0 million tonnes, but the composition and profitability of this volume are shifting. With export costs up by around 15%, traditional cost‑plus pricing models are under strain because buyers are resisting higher offer levels in the face of ample global supply and alternative origins.

Indian exporters, backed by large inventories and a competitive cost base, are playing a central role in keeping the global market supplied. About 500,000 tonnes of Indian rice currently at sea or delayed on the way to Middle Eastern buyers provides a buffer against temporary shortfalls, especially for Iraq and neighbouring markets. This is reinforcing a buyer’s market in which importers can switch between Thailand and India or delay purchasing decisions in the expectation of softer offer prices.

For Thai exporters, the result is a marked squeeze between rising costs and largely stable FOB price benchmarks. Unlike previous cycles where fuel or freight shocks could be at least partially passed on, today’s environment forces sellers either to concede margin or risk losing volume, particularly on highly competitive government tenders and private-sector contracts in the Middle East and Africa.

⛅ Weather & Production Outlook

Near‑term weather patterns in India’s northern and eastern plains – important for upcoming rice nursery preparations and water availability – are characterised by western disturbances bringing thunderstorms, gusty winds and light rain over Delhi, Uttar Pradesh, Bihar and adjoining regions through March 31.

These events are seasonal and, at this stage, do not pose a major risk to the 2026 kharif rice crop. However, they may temporarily disrupt logistics and port operations in North India, adding to short‑term shipment variability but not materially changing the overall supply picture that remains comfortable.

📆 Forecast & Trading Outlook

In the coming weeks, the rice market is likely to remain fundamentally well supplied, with logistics – rather than availability – as the main source of volatility. Key uncertainties include the duration and severity of Hormuz‑related shipping disruptions, the evolution of war‑risk premiums, and any policy response from major exporters such as India and Thailand.

Given current conditions, price risks appear skewed to the downside once freight markets stabilise, as delayed Indian cargoes reach destination and buyers continue to arbitrage between origins. For Thai exporters, the primary risk is further margin erosion rather than a collapse in demand, especially in core government programmes such as Iraq’s PDS where rice remains a staple.

📌 Strategy notes

• Exporters (Thailand): Prioritise long‑term contractual relationships with key buyers like Iraq, even at thinner margins, while using flexible freight routes and hedging tools to manage fuel and war‑risk exposure.
• Importers (Middle East, Africa): Use the current buyer’s market to diversify suppliers between Thailand and India, staggering tenders to capture potential further softening in FOB values as delayed Indian stocks clear.
• Indian and Vietnamese exporters: Leverage competitive pricing to capture additional market share but monitor policy risk and port‑level congestion, keeping shipment terms (FOB vs CIF) under close review.

📉 3‑day regional price indication (directional)

• India – New Delhi FOB (basmati & non‑basmati): Mild downward bias in EUR terms as logistics disruptions are already priced in and competition from other origins persists.
• Vietnam – Hanoi FOB (5% broken, Jasmine): Slightly soft to stable, tracking broader Asian price benchmarks and steady export programmes.
• Thailand – Gulf‑bound FOB shipments: Under upward cost pressure on a delivered basis due to elevated freight and insurance, even if nominal FOB rice values remain broadly steady.