Global rice markets could face further strain as China, the world’s leading rice producer, grapples with heavy rain and flood risks.

According to a recent report by Fitch Ratings, heavy rain in China’s grain-producing north-eastern region is expected to reduce yields, putting upward pressure on already high global rice prices.

China, responsible for the largest share of rice production in the world, raised flood alert levels for three provinces that contribute to 23% of its rice output: Inner Mongolia, Jilin, and Heilongjiang.

In recent weeks, China has been dealing with devastating floods, with typhoon Doksuri causing the heaviest rainfall in Beijing in the last 140 years.

The Fitch report highlights that key grain production areas in the affected provinces have been hit hard by heavy rains and remnants of typhoon Doksuri, and are now bracing for another deluge as typhoon Khanun moves north.

The excessive rainfall has saturated the grain fields, leading to reduced crop yields for the year, although the full extent of the damage is yet to be determined.

Fitch predicts that this will drive up domestic grain prices in China and potentially increase rice imports in the second half of 2023 to compensate for the potential yield loss.

If China’s own harvests fall short, the country may need to rely more on importing rice, further impacting global rice prices.

Global rice prices have already reached their highest levels in nearly 12 years, as reported by the Food and Agriculture Organization’s All Rice Price Index.

Market analysts are estimating even higher rice prices on the horizon due to India’s ban on non-basmati white rice exports and Thailand urging farmers to plant less rice amidst low rainfall.

India, responsible for over 40% of global rice trade, implemented the export ban on non-basmati white rice on July 20 to address rising domestic food prices.

Rice prices are currently hovering at a decade high, with rough rice futures trading at $15.98 per hundredweight (cwt).

In addition to rice, the Fitch report also highlights the impact of flood risks on major crops like corn and soybeans in Inner Mongolia, Jilin, and Heilongjiang. China is expected to increase imports of both grains compared to the previous year to mitigate potential losses.