Will it continue to rise and fall?, Global rice prices hit an 11 year high, India tightens "rice bags" | pushes up global rice prices | India's export ban

On August 4th, Nikkei News reported that since India implemented a ban on rice exports last month, concerns about global food inflation have intensified in the market, and rice prices have reached a new high in 11 years. Rice, which used to have stable prices, now faces increasing risks of agricultural inflation, just like expensive wheat.

The impact is more profound than 15 years ago

The Indian government announced on the 20th of last month that it will ban the export of rice other than steamed rice and Indian fragrant rice to ensure domestic market supply. The public opinion generally believes that India will hold general elections next year and regional elections this year, and controlling inflation has become the top priority of the Modi government. Therefore, the "rice bag" is used as an article.

However, India's move has caused waves worldwide. Sherry Mustafa, a rice market analyst at the Food and Agriculture Organization of the United Nations, believes that the ban in New Delhi coincides with an "unfavorable time" as global food security risks intensify.

Firstly, since September 2022, the global rice market prices have risen by 15-20%. India accounts for over 40% of global rice exports, with a total export volume of 22.3 million tons last year. The export ban will affect about 10 million tons of rice exports from the country, and the impact on the global market can be imagined.

Secondly, there are still about three months left for new crops to enter the market, and supply is currently tight. Other exporters have relatively low inventory. The sudden tightening of the "rice bag" by India, a major rice producer, will undoubtedly exacerbate the food shortage situation.

Once again, after the outbreak of the Ukrainian crisis, global wheat prices rose, and relatively stable rice became an alternative option to alleviate the food crisis caused by the soaring global grain prices. Now, due to the rupture of the Black Sea agricultural export agreement, wheat prices are high, and even rice, the stabilizer of the global food market, is no longer what it used to be.

Finally, due to climate factors such as the global El Ni ñ o phenomenon, rice production in many countries such as India has decreased. HSBC economists warn that extreme weather events may further affect crop yields and push up prices of various agricultural products.

US financial media CNBC stated that this is not the first time India has implemented a ban on rice exports. A similar ban was issued in October 2007, temporarily lifted, and re issued in April 2008, pushing up rice prices by nearly 30%. However, at that time, India had not yet acted as the main participant in global non Indian fragrant rice exports. Now, the impact of India's ban is clearly more far-reaching than 16 years ago.

Causing concerns about uncontrolled rice prices

"What happens when India bans the export of a staple food that is crucial for billions of people worldwide?" asked the BBC. Public opinion believes that it may have several impacts.

Firstly, it will raise concerns about global rice prices spiraling out of control.

Pierre Olivier Gurinchas, Chief Economist of the International Monetary Fund, believes that the ban will push up rice prices, and global food prices may rise by 15% this year.

According to a report by Nikkei News on August 4th, global rice prices have surged to a rare high in recent weeks. On July 27th, the trading price of Tammy was $607.50 per ton, and since the ban was issued, the benchmark price has risen by $62.50 within a week. At present, the trading price has climbed to the highest level since May 2012.

The report further points out that by the end of the crop growing season from 2023 to 2024, global rice inventories are expected to drop to 170.42 million tons, the lowest level since 2017-2018. Due to the decline in supply and weather conditions, global rice prices may continue to remain high.

At the same time, due to concerns about the impact of El Ni ñ o on rice production, people from Asian countries to the United States and Canada across the ocean are hoarding rice, leading to a rise in rice prices. At present, the export prices of rice from Thailand and Vietnam have risen to the highest level since 2021.

An analysis suggests that the rise in rice prices will also have a transmission effect on the prices of other agricultural products. Whether we can curb the global trend of rising food prices depends on when India will lift the ban, and whether the Black Sea agricultural export agreement can be restarted.

Regarding this, Samarrendu Mohanti, the head of the Asia region at the International Potato Research Center in Peru, said that the possibility of the Indian government lifting the export ban in the short term is very low and may continue until the general election in April next year. Industry analysts believe that the trend of increasing international grain prices will be more pronounced in the coming period.

Asian and African countries are impacted

In addition to affecting food prices, statistics show that India's ban may affect millions of people worldwide, with consumers in Asia and Africa being the hardest hit.

The share of rice banned from export by India accounts for approximately 15% of global rice trade. The countries that rely most on these rice include the Philippines, Malaysia, and Vietnam.

Barclays Bank pointed out that Malaysia may become the country most affected by the ban among Asian countries. The Philippines may become the country most affected by the global rise in rice prices.

The Nikkei Shimbun reported that the rise in rice prices may also affect Japan. Although Japan's rice is almost self-sufficient, it relies on imported rice to produce processed foods such as miso and rice cakes. Consumers may need to spend more money to purchase the aforementioned food.

Apart from Asia, many African and Middle Eastern countries are also vulnerable to the impact. According to BMI Research, a subsidiary of Fitch Solutions, the market heavily reliant on Indian rice is concentrated in sub Saharan regions, as well as the Middle East and North Africa, particularly in countries such as Djibouti, Liberia, and Qatar.

The report on World Food Security and Nutrition released by the United Nations and other organizations this year shows that 19.7% of Africa's population is in a state of hunger. If the situation worsens, political and social unrest may spread in African countries.

Sherry Mustafa said that the ban has the greatest impact on vulnerable groups as they allocate a larger portion of their income to purchasing food. Price increases may force them to reduce the amount of food they consume, shift towards substitutes for malnutrition, or cut back on spending on other essential goods.

It is worth noting that after India's restrictions on rice exports, the United Arab Emirates and Russia have successively announced the suspension of rice exports. Samarendu Mohanty is concerned that if major rice exporting countries such as Vietnam and Cambodia also implement export restrictions, while major rice importing countries such as Indonesia and Malaysia hoard, the global rice market may become chaotic.