Thailand heads the list of nations confronted with the unexpected spectre of overabundance thanks to favourable weather in Asia’s paddy heartlands. The region’s countries are now in a fierce rice price war as they seek buyers for their swelling stocks, but there are sharp divisions of opinion over where prices go from here.

“A good crop in several countries allowed key exporters, particularly India and Pakistan, to compete by offering at low prices,” Charoen Laothamatas, president of the Thai Rice Exporters Association, told Nikkei Asia.

The price of Asia’s main food has not been anything like the wild ride of other staples. At US$420 per tonne, the benchmark 5% common grade Thai rice is trading within a few percentage points of where it was at the start of 2021 and shortly after the invasion this year. Intense price competition means buyers can get prices much lower than that on other rice.

Both wheat and corn prices soared more than 40% as grain exports from Ukraine’s ports were blocked and India banned wheat exports to prioritise domestic amid hot weather that disrupted its own production.

Talks to end the blockade and bumper crops elsewhere have brought prices down sharply in recent weeks but wheat is still up 15% from a year ago.

In contrast to its ban on wheat exports, India is trying to sell more rice overseas. The world’s largest rice exporter sold an average of 22 million tonnes of rice over the past few years, almost half the world’s rice trade.

The price competition is already fierce. According to traders, India can offer as low as US$343 per tonne, well below US$388 offered by Pakistan and US$418 by Vietnam. Thailand offers prices in the US$420s due to higher production costs.

“The Thai rice price was more than US$80 per tonne higher than India and other competitors. That made it difficult for Thai exporters to compete with others,” Charoen said, adding that world rice prices are expected to remain under pressure.

Thailand is due to harvest its major crop in October, when around 24 million tonnes of paddy will be reaped.

“It would be another year of disaster as we don’t know how deep rice prices will plunge,” one exporter said. “That would force the Thai government to issue price intervention schemes to support farmers.”

For the government, which faces a general election next year, it is crucial to keep more than four million rice-farming families happy. The consequence is that exporters are unlikely to sell at lower world prices when prices are being propped up at home, reducing their share of the global market.

The quantity of rice in storage around this time of year has been historically high for several years, at more than one-third of annual demand. The decline in wheat and corn prices in recent weeks has cooled talk that rice may gain favour as an alternative, something that could have decreased elevated inventories.

Not everyone agrees rice prices will stay low, however, and several point to fertiliser shortages as a reason to expect an increase over time.

Russia is the world’s biggest exporter of nitrogen, the second-largest of potassium, and third of phosphorous – key ingredients of fertiliser, which is now harder and more expensive to obtain as a result of international sanctions.

Akio Shibata, president of the Natural Resource Research Institute in Japan, warned that Asia could not remain optimistic about its staple supply. “If fertiliser prices continue to rise and its supply disrupted, rice prices will likely follow that of wheat and corn,” Shibata told Nikkei Asia.

Thailand, again, could be particularly vulnerable. Thai farmers typically rely on expensive chemical pesticides and fertilisers. It imports around four million tonnes of fertilisers annually.

That is different from rivals such as Vietnam and India. Vietnam has spent many years developing new rice strains and rice-growing techniques that help cut production costs, while India and Pakistan grow rice in vast areas with economies of scale and cheap labour costs.

As a result, the productivity of Thai rice remained low, with yield per rai (0.16 hectare) standing at 454kg, well below Vietnam’s 803kg per rai. Disruption in fertiliser supply could further lower the productivity of Thai rice growers.

The government in June approved a plan to allow Thai and foreign investors to develop the country’s first potash mine to enable the domestic production of fertiliser. However, it will take years before a mine is actually up and running.

David Beasley, executive director of the World Food Programme, said fertiliser shortages could depress rice yields across the region and lead to a repeat of the 2007-2008 price spike that followed a drought in India and sent prices to US$1,000 a tonne.

“Asia is going to be pounded with this fertiliser crisis, which is going to devastate rice harvest over the next 12 months,” he said. “And when you look at how much progress has been made on reducing hunger in the world, primarily in Asia … this could truly set back global food security.”