Rice Prices Rising as El Nino Drought Builds
Rice prices in the global market have begun to climb after the bearish tone that opened the season. Thai rice prices, a closely watched benchmark, have surged by $40 to $50 a tonne over the past two weeks. Industry participants in Thailand report a more optimistic outlook for the second half of the year as demand is expected to rebound.
That optimism is anchored in the prospect of a drought-bearing El Nino emerging in June. Several countries have already begun to stockpile rice ahead of the anticipated dry weather, adding a layer of precautionary demand to an already firming market.
El Nino Strength and Global Reach
El Nino could develop into a Super El Nino, a more severe phase that may persist until February 2027. The event stems from an aggressive natural shift in sea surface temperatures across the eastern equatorial Pacific Ocean.
The impact is expected to be minimal across North America, Europe and Northern Asia. Significant disruptions are projected elsewhere, particularly across tropical agricultural zones.
Unlike La Nina events, which strike major mid-latitude grain belts producing corn, soybeans and wheat, El Nino weighs most heavily on tropical agriculture. The crops most exposed to significant dryness include rice, sugar cane, coffee, cocoa and oil palm.
Drought Conditions Tighten Southeast Asian Supply
Drought conditions are expected to be severe across Southeast Asia, even as North America sees little to no effect. Indonesia, Malaysia and the Philippines are forecast to experience pronounced drying and notable drought stress.
The most anomalous dry conditions are projected to run from late September 2026 through February 2027. Because the region feels El Nino effects almost immediately after the pattern establishes itself, rice production cycles in the second half of the year will face direct water-scarcity pressure.
Monsoon Season Weakness Threatens Indian Output
Monsoon season performance is central to the outlook for Indian agriculture, and forecasts point to a weakened and negatively affected season. The onset of the monsoon has already been delayed and is reported to have lost strength.
The adverse pattern is expected to begin in July 2026 and become most pronounced between August and October 2026. Since Indian rice cultivation depends heavily on a robust monsoon, below-normal rainfall threatens both crop yields and sugar cane production alongside rice.
Contrasting Extremes Across the Tropics
While much of tropical Asia dries out, southern China is forecast to confront the opposite problem of excessive rainfall. The heavy moisture and associated flooding risk are projected for the summer of 2026 and could disrupt fields and damage localised agricultural infrastructure.
The divergence underscores how El Nino reshapes regional weather in opposing directions, complicating supply forecasts for traders tracking multiple growing zones at once.
Regional Breakdown of Expected Weather Anomalies
The projected timeline and geographic impacts are summarised in the table below.
Why Rice Prices Remain Sensitive to El Nino
Rice prices are particularly responsive to El Nino because the bulk of global production is concentrated in the tropical and subtropical belts most exposed to the pattern. Precautionary stockpiling, weaker monsoon season prospects and intensifying drought conditions are converging to support a firmer price environment heading into the second half of 2026.
With the event potentially extending into early 2027, the balance of risk for rice production remains tilted toward tighter supply. Market participants are likely to keep a close watch on monsoon progress and Southeast Asian rainfall as the defining variables for the months ahead.