In May 2026, Asian rice prices experienced a dramatic surge of about 20%, a situation not seen since the 2008 food crisis.
This wasn't caused by a single factor but by a 'perfect storm' where three distinct pressures—cost, supply, and weather—all intensified at the same time. This rare convergence fundamentally reshaped market expectations, signaling that higher prices might be here to stay for a while.
Let's break down the causal chain. First, the cost pressure originated from the conflict in the Middle East, which led to a near-total blockade of the Strait of Hormuz, a critical chokepoint for global trade. This immediately impacted energy markets. WTI crude oil prices jumped over 40% in a single month, driving up costs for fuel, transportation, and irrigation. Simultaneously, the blockade disrupted the supply of key fertilizer ingredients like ammonia and urea, causing fertilizer prices to spike by nearly 20%.
Second, the supply pressure came directly from the same blockade. Hundreds of ships and their crews were stranded, creating a severe logistics bottleneck. This meant that even if rice was available for export from countries like Thailand and Vietnam, getting it onto ships and to its destination became difficult and expensive. War risk insurance premiums for shipping soared, adding millions of dollars to the cost of a single voyage, further tightening the physical supply chain.
Finally, weather risk entered the equation. Just as these cost and supply shocks were unfolding, meteorological agencies began raising the probability of an El Niño event. For Asia, El Niño often means a weaker monsoon season with less rainfall, which is critical for rice planting. India's weather service added to these fears by forecasting below-average rainfall, casting a shadow of uncertainty over future harvest yields.
Faced with rising production costs and the looming threat of a poor harvest, producers and traders began raising their price offers sharply. The benchmark Thai 5% white rice price climbed to a 16-month high of $451 per ton. This event is a clear example of how interconnected our global systems are, where a regional conflict and a climate pattern can combine to directly affect the price of a food staple for billions of people.
- Strait of Hormuz: A vital maritime chokepoint connecting the Persian Gulf with the open ocean, through which a significant portion of the world's oil and fertilizer components are transported.
- El Niño: A climate pattern characterized by the warming of sea surface temperatures in the central and eastern Pacific Ocean. It can disrupt weather patterns globally, often causing droughts in Southeast Asia and India.
- FOB (Free On Board): A shipping term indicating that the seller's responsibility ends once the goods are loaded onto the shipping vessel. The buyer is responsible for sea freight, insurance, and other costs from that point.