Commodity Watch: The Sticky Situations of the Global Rice Trade

<div class="grid grid--33-66-col"><div class="col"><img loading="lazy" data-fr-image-pasted="true" src="/getContentAsset/e4db1c4c-2687-44cd-adbd-db1eb849e5d2/cb87803a-320c-480f-ab75-7b9029eaaf79/Ahmad-Al-Sati-new.jpg?language=en" alt="Ahmad Al Sati" title="Ahmad Al Sati" class="fr-fic fr-dii" style="width: 180px"></div><span style="font-size: 12px"><div class="col"><strong>AHMAD AL-SATI<br></strong>PORTFOLIO MANAGER<br><br><p>Ahmad is the President and portfolio manager for Gemcorp Capital Advisors LLC, based in New York.&nbsp;<br><br>Ahmad has spent most of his career in the global credit markets. Prior to Gemcorp, Ahmad was President of Pandion Mine Finance and RiverMet Resource Capital, LP - a fund focused on investing in precious metals, where he was responsible for managing the investments and the day-to-day operations of the registered investment adviser.&nbsp;</p></div></span></div><hr><p>Twenty percent of global calorie consumption is supplied by rice. Across Asia alone, over two billion people meet 80% of their caloric intake with rice. The increased production of rice through better farming, technology and seeds could address global food insecurity. Yet, despite the projected increase in the 2025/26 harvest, prices and distribution remain uneven.</p><p>In Japan, prices of domestically produced rice more than doubled in the last 12 months, marking a period of higher inflation that contributed to the recent resignation of Japan’s prime minister. Japan’s story illustrates that a global supply glut does not necessarily mean uniform distribution across markets as trade constraints lead to price mismatches – and opportunities. Rice production in Japan is highly controlled. The government uses a cooperative to purchase rice and provides incentives not to grow it, thereby controlling both demand and supply. However, the weather is unpredictable. A heat wave in 2023 depressed production, an earthquake reduced milling capacity, and panic buying drove prices higher. The government then overestimated production for 2025 adding to the price pressures. High Japanese tariffs on rice do not help either. Only increased local production or lower tariffs will help.</p><p>Moving goods efficiently and effectively from production to consumption is key to meeting the global food needs of 8 billion people. This is true even if a country produces the commodity (such as Japan) or partially imports it (such as the US). For example, in the US, prices of locally produced rice are decreasing (by 37% by some estimates) hurting farmers, even as regions such as Puerto Rico that rely on specific imported rice face up to a 54% price increase. The US imports 33% of its rice overall but requires different types of grains in different regions, resulting in pricing inefficiencies across the country.&nbsp;</p><p>Globally, rice production (subject to specific weather patterns) is highly dependent on a handful of countries that produce 90% of the world’s rice. However, global demand is more dispersed. The production patterns have shifted over time. In 2000, Thailand and the US were the mainstay of global rice trade. Today, India sits at the epicentre of global rice trade with its trade nodes for rice increasing from 9 in 2000 to 61 in 2021. India’s leverage revealed itself in 2024 after it lifted its export ban and Asian prices dropped by approximately 10%.</p><p>Rice will remain a key component of global diets as demand is expected to increase by 25% over the next 25 years. Production is expected to more than keep up. But a global glut is immaterial for global consumers if the trade “pipes” don’t work and delivery is expensive, ineffective or late – even Japan was unable to manage the timely delivery of rice in response to blunt price increases. Efficient and effective trade is paramount to facilitating food security and the overall distribution of an essential product. Trade then becomes vital for people’s overall well-being and development.</p><p style="font-size: 12px"><strong>Important Information:</strong></p><p style="font-size: 12px">This document has been prepared solely for informational purposes by Gemcorp (as defined below), is confidential and may not be reproduced. This document is not intended for public use or distribution and remains the property of Gemcorp which reserves the right to require the return of this document at any time.</p><p style="font-size: 12px">This document does not constitute an offer or solicitation of an offer with respect to the purchase or sale of any security and should not be relied upon when evaluating the merits of investing in any securities or form the basis of an investment decision. The information in this document has been obtained from various third-party sources, some of them forward-looking statements and/or projections. Any forward-looking statements and/or projections are inherently subject to material business, economic and competitive risks and uncertainties, many of which are beyond Gemcorp’s control. In addition, these forward-looking statements and/or projections are subject to assumptions with respect to future business strategies and decisions that are subject to change. 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Professional Clients has the meaning prescribed to it in the FCA’s Handbook.</p><p style="font-size: 12px">In the United States, Gemcorp Capital Advisors, LLC, is registered as an investment adviser with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended (CRD # 329386/SEC#:801-130200).</p><p style="font-size: 12px">In the Abu Dhabi Global Market (“ADGM”), this document is communicated to Professional Clients only by Gemcorp Capital Management (Middle East) Limited with registered office address Unit 20, Level 7, Al Maryah Tower, Abu Dhabi Global Market Square, Al Maryah Island, Abu Dhabi, United Arab Emirates is regulated by the ADGM Financial Services Regulatory Authority (Financial Services Permission Number: 220156). 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