Policies and El Niño: Redrawing trade routes and reshaping rice markets

Weather has always influenced rice production and prices, but 2026 is increasingly becoming a year in which government policy is emerging as an equally powerful market driver. From Southeast Asia to West Africa, governments are recalibrating import rules, adjusting domestic support measures and rethinking food security strategies — reshaping trade flows that had remained largely unchanged for years.

Unlike the supply shocks that defined 2023 and 2024, today's market is being influenced by a combination of targeted policy interventions, changing buyer behavior and climate uncertainty. Together, these developments are creating new opportunities for some exporters while forcing others to rethink traditional markets.

Governments' bigger role in rice trade

Perhaps nowhere is this shift more visible than in the Philippines, the world's largest rice importer.

Manila has stopped issuing new import clearances for 5% broken rice, encouraging buyers to shift toward lower broken grades while simultaneously investing in domestic milling and seed development. The objective extends beyond supporting farmers during harvest. Authorities are seeking to improve the competitiveness of locally produced rice over the coming years while reducing reliance on premium imported grades.

The policy also reflects a broader evolution in procurement strategy. In an exclusive interview, Agriculture Secretary Francisco Tiu Laurel Jr. told S&P Global Energy Platts that the Philippines' actual rice import requirement in 2026 is around 3.6 million to 3.8 million metric tons, while purchases beyond that would primarily serve strategic buffer stocks.

According to S&P Global Energy CERA, the Philippines is expected to import 5.6 million mt of rice in the 2026-27 marketing year (July-June), up 49% from the previous marketing year, thereby retaining its position as the world's largest rice importer.

While Vietnam remains the Philippines' dominant supplier, Manila is increasingly exploring alternative origins, including Thailand, Pakistan, Myanmar and India, as a part of a broader diversification strategy.

Unlike the Philippines, Indonesia is expected to maintain its rice self-sufficiency policy in 2026, keeping one of Asia's largest traditional importers largely absent from the international market.

The shift marks a clear departure from the aggressive buying seen during the supply disruptions of 2023-24, when India's export restrictions sent global rice prices to multiyear highs and importers rushed to secure supplies.

Policy interventions across continents

The Philippines is far from alone.

India has expanded its Open Market Sale Scheme by releasing 4.8 million mt of government rice stocks to improve domestic availability. While the move is expected to ease supply tightness, exporters say strong export demand and ethanol consumption are likely to continue supporting the market.

Pakistan, meanwhile, has extended its Drawback of Local Taxes and Levies (DLTL) scheme through September. However, exporters believe the extension is unlikely to improve competitiveness significantly as domestic supplies remain tight and FOB prices elevated.

In July, Kenya approved duty-free imports of 490,000 mt of rice through Nov. 30 to help stabilize domestic prices. Given India's significant price advantage over Pakistan, the policy is expected to support Indian exports while intensifying competition among suppliers.

West Africa has witnessed an even broader policy reset. Nigeria reduced rice import tariffs in April, potentially encouraging more direct imports while altering long-established trade routes through Benin. Benin introduced stringent licensing requirements in April and substantial financial guarantees for importers, effectively concentrating imports among larger companies. Shortly afterward in late April, Burkina Faso suspended rice imports altogether to support domestic production, further disrupting regional trade flows and weighing on Indian parboiled rice prices.

Taken together, these developments illustrate how government decisions are increasingly influencing commercial flows that were previously determined primarily by price competitiveness.

Price competitiveness still matters

Despite growing policy intervention, price remains central to buying decisions.

India continues to offer some of the most competitive export prices among major origins, strengthening its position across African markets. Pakistan, despite government support measures, continues to face challenges because high domestic prices limit its ability to compete.

Thailand and Myanmar remain premium-priced suppliers, while buyers continue to compare origins based on price, quality and freight economics.

Platts assessed Indian 5% white rice, the cheapest in Asia, at $353/mt FOB on Aug. 4, up $1/mt day over day, putting it at a discount of $37/mt to Pakistan, $82/mt to Vietnam, $86/mt to Thailand and $141/mt to Myanmar 5% white rice.

Climate risks have not disappeared

While policy dominates headlines, weather remains an underlying risk.

Thailand is preparing for fresh second-crop arrivals, yet exporters remain divided over whether increased supply will pressure prices or if weather concerns and renewed buying interest will offset additional availability.

Pakistan has reported delayed sowing in some regions due to water availability, while concerns surrounding El Niño continue to influence market sentiment across Asia.

Vietnam, another key exporter, faces a different set of challenges. A smaller summer-autumn planting area and rising input costs are squeezing margins, and should El Niño materialize, the strain on production could feed directly into tighter export availability.

"El Niño is expected to bring widespread rainfall deficits and prolonged heatwaves in the coming months, with precipitation forecast to fall by 10%-50% across large areas," Arup Gupta, CEO of AgVentures said, adding that lower reservoir levels and water shortages could place further pressure on the 2026 summer/autumn crop.

Memories of the 2023-24 El Niño, combined with renewed forecasts for another possible El Niño event during 2026-27, continue to keep market participants focused on production risks across major exporting countries. A prolonged period of below-average rainfall could reduce yields, tighten exportable supplies and alter market sentiment.

Malaysia is expected to remain a steady importer, with potential increases in buying if El Niño weakens domestic production.