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According to a report by Fitch Solutions cited by CNBC, countries worldwide are facing the most significant rice shortage in 20 years. The report estimates an 8.7-million-ton shortfall in global rice supply during the 2022-23 crop year, which is the most significant deficit since 2003-04, when it was 18.6 million tons.

Last year, global rice production reached 502.9 million tons, making it the third most produced grain after corn and wheat. However, the production has been declining due to unfavorable weather conditions in rice-producing countries such as China, Pakistan, India, France, Germany, and the UK.

China, which is the world's largest rice producer, faced heavy rains and flooding in the second half of last year that damaged much of the country's rice farmland. Currently, the country is experiencing the highest level of drought in its rice-growing regions in over two decades. Pakistan, with nearly 8% of global rice trade, experienced severe flooding this year, resulting in a 31% annual production drop.

Additionally, India, the second-largest rice producer globally, is expected to suffer from intense heat in the second and third quarters of 2023, which could jeopardize its crop yield. Analysts anticipate that rice prices will remain high, from $16-18 per cwt (50.8kg), for the rest of the year due to the supply constraints.

Apart from the supply constraints, rice prices are also affected by Russia's military operation in Ukraine, jeopardizing both Ukrainian and Russian grain supplies to the global market and driving up wheat prices. This has made rice an increasingly attractive alternative, boosting its demand.

Since rice is the staple food commodity across multiple markets, analysts warn that its price is expected to increase global food price inflation. However, Fitch Solutions estimates that the global rice market may return to an almost balanced position in 2023/24 and have a surplus in 2024-25, largely due to an expected surge in production in India.