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

In a recent report, Fitch Ratings stated that “heavy rain in China’s grain-producing northeastern region, which will reduce yields, is likely to put upward pressure on already high global rice prices.”

China, responsible for the largest rice production worldwide, raised flood alert levels for three provinces that contribute to 23% of the country’s rice output: Inner Mongolia, Jilin, and Heilongjiang.

Recent devastating floods have ravaged China, with Typhoon Doksuri being one of the worst storms in years. Capital Beijing experienced the heaviest rainfall in 140 years.

Fitch highlighted that heavy rains and remnants of Typhoon Doksuri have affected many crucial grain production areas in the aforementioned provinces. Additionally, they are expected to face “another deluge as Typhoon Khanun moves north.”

The soaked grain fields resulting from the floods will lead to decreased crop yields for the year, as stated by the Fitch report. However, the full extent of the damage is still uncertain.

The credit ratings firm stated, “This will increase China’s domestic grain prices and likely drive higher imports in the second half of 2023 to partially offset the potential yield loss.” If China’s own harvests fall short, the country may need to import more rice, further driving up global prices.

According to the Food and Agriculture Organization All Rice Price Index, global rice prices have reached their highest point in nearly 12 years.

Market analysts predict even higher rice prices ahead due to India’s recent ban on non-basmati white rice exports and Thailand’s call for farmers to reduce rice planting to conserve water amid low rainfall.

India, accounting for over 40% of global rice trade, implemented the ban on July 20 to address soaring domestic food prices.

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

In addition to rice, the Fitch report also highlighted corn and soybeans as major crops grown in Inner Mongolia, Jilin, and Heilongjiang, which will also be affected by flood risks. China is expected to import more of both grains this year compared to last year.