The Philippines and other Asian nations face a significant threat to rice production due to the dual impact of the impending El Niño climate phenomenon and high fertilizer prices. The Department of Agriculture initially projected a record high in palay (paddy rice) production for the year, but this forecast has been revised downwards to 19.87 million metric tons, and could drop further by as much as 4 million metric tons, due to the severe El Niño and ongoing Middle East conflict. The Middle East conflict, specifically Iran's control of the Strait of Hormuz, has caused a 33% increase in fertilizer prices, with about a third of key fertilizer chemicals passing through this strait.
Farmers, particularly in the Philippines, are facing surging production costs. Filipino farmers spend approximately P60,000 per hectare to grow rice, with labor accounting for 30% of total costs. Fertilizer prices in the Philippines are higher than in leading rice producers like Vietnam and Thailand, further impacting farmers' ability to apply sufficient nutrients. This reduced fertilizer application is expected to significantly affect harvests in the 2027-2028 seasons. Yvonne Pinto, director general of the International Rice Research Institute, highlighted the risk of farmers abandoning rice farming due to these escalating costs, which would lead to increased imports, higher prices, and market volatility.
El Niño is expected to bring dryer conditions, which are particularly detrimental to water-intensive rice farming, especially in the Philippines where only about 40% of farmland is irrigated. Average rice output in the Philippines is 4.1 to 4.2 metric tons per hectare, significantly below the attainable 6-8 tons under improved systems. The combined effect of reduced yields and higher input costs from El Niño and the Middle East conflict creates a stagflationary shock—higher inflation and lower growth. Nomura projects that a severe El Niño could decrease Philippine GDP growth by 0.2 percentage points and noted the Philippines' vulnerability due to its status as a net food importer. The UN's Food and Agriculture Organization (FAO) observed increasing international rice prices, especially from exporting countries like Vietnam and Thailand, where the Philippines normally imports from. The FAO also indicates an 86% chance of El Niño exceeding moderate strength. In response to these pressures, the Philippine government plans to import 330,000 metric tons of rice this year to address buffer stock deficits. Long-term solutions proposed by Pinto include better seed systems, climate-resilient varieties, efficient fertilizer management, mechanization, improved irrigation, and digital advisories.
The early end of the rainy season in southern Vietnam due to El Niño could also impact regional rice production. Forecasts suggest below-average rainfall and saltwater intrusion extending tens to hundreds of kilometers inland in the Mekong Delta, affecting rice-growing areas, orchards, and aquaculture. This poses a threat to food security and emphasizes the need for proactive measures like freshwater storage, flexible irrigation, and adaptation to drought and salinity. The situation echoes severe droughts and saltwater intrusions experienced in 2015-2016 during previous strong El Niño years. Oil price hikes, such as those that followed attacks in the Middle East, also exert upward pressure on food prices by increasing shipping, cold storage, and packaging costs. Companies are likely to pass these increased expenses to consumers, with fresh produce and dairy potentially seeing larger impacts.
