From surplus to strain: world rice supply threatened by Iran war, El Nino

• Key exporters Thailand and Vietnam, plus major importers Philippines and Indonesia, are cutting rice acreage as fertilizer prices have risen 15-40% and farmers reduce input usage to manage costs
• Philippines faces potential production drop of up to 6 million tons from typical 19-20 million ton output, leaving the country in a 'precarious position' given uncertain import availability
• FAO chief economist warns situation could become 'pretty serious' if Strait of Hormuz remains blocked beyond 2-3 weeks, though global stockpiles of 42 million tons in India provide some cushion

Summary: Global Rice Supply Under Pressure from Iran War and El Niño

Global rice supplies face significant strain as farmers across Asia reduce planting due to fertilizer shortages and rising fuel costs stemming from the Iran war, compounded by an emerging El Niño weather pattern threatening yields.

Key Supply Disruptions:

The Iran conflict has disrupted fuel and fertilizer flows through the Strait of Hormuz, impacting major rice exporters Thailand and Vietnam, plus import-dependent Philippines and Indonesia. According to UN FAO Chief Economist Maximo Torero, the situation could become "pretty serious" if the strait isn't reopened within two to three weeks.

Regional Impact:

• Thailand: Production costs have surged to 6,000 baht ($184) per 0.4 acre from 4,500-5,000 baht, with fertilizer prices rising to 1,000-1,200 baht per bag from 850 baht
• Philippines: The world's largest rice importer faces potential output decline of 6 million tons from typical production of 19-20 million tons
• Indonesia: Rice harvest area expected to shrink 10.6% to 3.85 million hectares, with production dropping 11.12% to 20.68 million tons

Additional Challenges:

El Niño conditions will bring hotter, drier weather to Southeast Asia in the second half of 2025, further straining yields. Supply chain bottlenecks include shortages of polypropylene bags, limited trucking availability, and shipping disruptions.

Market Context:

Despite concerns, global rice inventories remain ample following years of bumper harvests. India holds record stockpiles of 42 million tons—approximately one-fifth of global reserves—providing a buffer. However, the FAO expects tighter global supplies in late 2025 and early 2026, with prices likely to rise. Historical precedent shows rice disruptions can trigger significant price spikes, as seen in 2008 when prices doubled to $1,000/metric ton.