The Rice Market Reaction to El Nino Southern Oscillation Shocks

We study the role of El Niño Southern Oscillation (ENSO) in the intermediate-term price dynamics of twenty rice varieties across six key rice-exporting countries over the 2011-2021 period. We apply two inter-related techniques. First, we generate impulse responses for up to 26-week horizons from linear projections to illustrate changes in rice price growth after ENSO shocks. Then, we assess the role of ENSO in predicting rice prices over the considered horizons. We find that ENSO shocks alter the dynamics of rice export prices from Thailand and, to a lesser extent, South America. In these regions, we also find that ENSO-related information facilitates the more accurate intermediate-term price forecasts. Since the price of Thai 5% long-grain white rice is considered the international price or the reference price, the fact that that ENSO shocks alter the price dynamics of rice varieties from Thailand suggests the susceptibility of international rice markets to ENSO shocks. Overall, our findings allude to the heterogeneity of the ENSO effect on rice markets and offer important insights for assessing the repercussions of climate change, which has been hypothesized to amplify ENSO cycles as well as the related weather repercussions in the usually affected regions.