Thai Rice Under Pressure as Middle East Demand Slumps and El Niño Risk Builds

Thai rice faces a challenging export environment in 2026: shipments are down around 12% year on year in January–April despite firmer demand from some food‑security buyers, while weather and currency developments keep upside risk to prices. Global buyers continue to secure rice amid El Niño concerns, but Thailand is losing share to cheaper origins such as India and Vietnam. A stronger baht, high nitrogen fertiliser costs and early but dry monsoon conditions undermine Thai competitiveness just as Middle Eastern demand softens sharply. Importers in Southeast Asia and Southern Africa are partly filling the gap, yet not enough to offset the loss of Iraq and other core markets. With reservoirs low and El Niño probabilities high into late 2026, supply risks could tighten the market again if rains underperform in the coming months.

Prices

Indicative FOB offers in India and Vietnam are broadly stable in July, reflecting comfortable near‑term availability but also lingering weather and geopolitical risk. Converted to EUR (using ~1.10 USD/EUR), Indian medium‑grain and basmati types cluster between about EUR 0.32–1.45/kg, while Vietnamese long‑grain white sits close to EUR 0.31–0.52/kg, depending on quality. Thai fragrant rice typically trades at a premium to Vietnamese and Indian competitors, but that premium has become harder to sustain given currency and cost pressures.

Benchmark Vietnamese export quotations have shown signs of recovery in June–July, supported by solid demand from the Philippines and China, even as absolute price levels remain below last year’s highs. In contrast, Thai export margins are being squeezed by stronger domestic costs and the baht’s appreciation, limiting the scope for aggressive price cuts to regain Middle Eastern market share.

Supply & Demand

Thailand’s rice exports reached roughly 2.2 million metric tons in January–April 2026, down about 12% year on year in volume, with export value around USD 1.25 billion. The main drag came from the Middle East, especially Iraq, where importers shifted to alternative origins amid geopolitical tensions and logistical disruptions. Competing suppliers—primarily India and Vietnam—have been able to offer more competitive pricing and, in some cases, shorter routes, eroding Thai share in these premium fragrant rice markets.

At the same time, Thailand has seen stronger buying from Malaysia, the Philippines, South Africa, Angola and Mozambique, driven largely by food‑security concerns and the desire to build stocks against El Niño‑related supply risks. However, these incremental flows have not fully compensated for reduced demand from traditional Middle Eastern customers, leaving total exports below last year’s levels. By contrast, Vietnam shipped about 5.02 million tons in the first half of 2026, earning USD 2.38 billion, underscoring its growing role in global trade and its ability to capitalise on demand from Asian buyers.

Fundamentals & Cost Structure

Thai fundamentals are currently shaped by tight on‑farm margins. Nitrogen fertiliser prices remain elevated versus historical norms, inflating cultivation costs and discouraging aggressive expansion of planted area. This is consistent with broader global fertiliser trends, where urea prices and other nutrient costs have stayed high on the back of energy markets and supply bottlenecks. Higher input costs make it harder for Thai exporters to match low‑cost competitors, especially when those competitors also benefit from cheaper freight into key destinations.

Currencies add another layer of pressure. The Thai baht appreciated by around 20% in January–April 2026, making FOB offers more expensive in USD terms just as international buyers became more price‑sensitive. Exporters report that this currency shift has compressed margins and forced them either to sacrifice volumes to defend prices or to discount heavily at the expense of profitability. At the same time, some Indian and Vietnamese exporters have been able to quote more attractive USD prices, helping them win tenders in the Gulf and Middle East.

Weather & El Niño Outlook

Thailand’s 2026 rainy season started early, around mid‑May, but cumulative rainfall for May was roughly 30% below normal, and reservoir storage sat near 36% of capacity. These conditions heighten concern over water availability through June and July, particularly for irrigated paddy in major producing basins. National and international agencies highlight a high probability that El Niño conditions will persist or strengthen into late 2026, implying continued risk of below‑normal rainfall and above‑normal temperatures.

Such a pattern would threaten yields for both main and off‑season crops, especially in the Northeast and upper Central regions, and could prompt tighter water allocations for agriculture. If rains underperform during the key vegetative and reproductive stages, Thailand’s exportable surplus in late 2026 and early 2027 could be markedly lower. This would likely support regional prices and encourage further stock‑building by import‑dependent countries, even if short‑term physical availability still appears comfortable.

3–6 Month Market Outlook & Trading Strategy

Over the next quarter, the rice market is expected to remain fundamentally tight‑to‑balanced, with downside in Thai export volumes but relatively firm international prices due to weather and geopolitical uncertainties. Thai shipments will depend heavily on whether Middle Eastern buyers resume normal procurement and on how much India and Vietnam can continue to undercut Thai offers. If El Niño‑related rainfall deficits intensify, the narrative could quickly shift from demand‑driven weakness to supply‑driven tightness.

• Importers (Middle East, Africa, ASEAN): Consider staggering purchases but avoid excessive delay, as Thai supply could tighten if reservoir levels fail to recover. Use Vietnam and India as competitive benchmarks when negotiating Thai fragrant cargoes.
• Thai exporters: Focus on premium and niche fragrant segments where Thailand retains a quality edge, while selectively discounting in food‑security‑driven markets. Closely manage FX exposure given the baht’s strength.
• End‑users / food industry: Lock in a portion of Q4 2026 requirements via forward contracts or call options, particularly for fragrant and specialty grades that are more vulnerable to Thai production risks.

Short-Term (3-Day) Directional View

• FOB India (non‑basmati, New Delhi): EUR‑denominated offers seen broadly stable to slightly softer, with modest downward pressure from competitive domestic supply.
• FOB Vietnam (5% broken & Jasmine, Hanoi): Prices likely to remain firm to marginally higher as strong demand from the Philippines and China underpins offers.
• Thai fragrant export market (implied): Directionally steady to mildly firmer, as exporters resist deep discounting in the face of higher costs and weather‑related production risk.