Factors that Influence Rice Prices

Rice prices fluctuate due to many factors. Many of the factors below decide the international market:

• Weather: Role of weather in rice production is immense. Temperature, rainfall and soil moisture are the important parameters that determine the crop condition. Further, natural calamities can also affect crops. Markets keep watch of these developments.
• Minimum Support Price: Changes in the minimum support prices (MSP) by the government also have immense impact on the price of rice.
• Government policies: Exchange rates, Fiscal policies, Export incentives and export promotion also influence price.
• Substitute Product: Availability of substitute products at cheaper rate may lead to weakness in demand. This situation happens especially when the main products price tends to become higher.
• Consumption: Rice consumption depends on two factors – population and income. Lets take for example Asia. Rice is the staple food of Asia. Low-income groups consume more rice according to the per capita income increase. But as the income increases, there arrives a point when the consumption starts to dip. Income growth and reduction in population result in a low consumption of rice.
• Seasonal cycles: Seasonal cycles are present in rice cultivation. Price tends to be lower as harvesting progresses and produce starts coming into the market. At the time of sowing and before harvesting price tends to rise in view of tight supply situation.
• Demand: Import demands as well as domestic demand.
• Breakthrough in the technology may increase the productivity and would lead to more supply. This may bring some softness in the price.

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