Will the impact on the international market surpass the Russia-Ukraine conflict?, India restricts rice exports and international grain prices | restricts rice exports | India
According to foreign media reports, the Indian government announced on the 20th that it will ban the export of rice other than Indian fragrant rice, which will take effect immediately. This will halve the export volume of India, the world's largest rice exporting country, and raise concerns in the international market about further rising global food prices. Chairman of the Indian Rice Exporters Association B V. Krishna Rao even believes that this move may disrupt the international market more than the Russia-Ukraine conflict.
India's move towards rice exports
According to Reuters, the Indian government issued a statement on the 20th stating that in order to ensure sufficient rice supply in the Indian market and alleviate the rise in domestic rice prices, the Indian government has revised its export policy to ban rice exports other than Indian fragrant rice.
India is the world's largest exporter of rice, with a record high of 22.2 million tons of rice exported last year, accounting for over 40% of the world's total exports, and even exceeding the combined export volume of other rice exporting countries such as Thailand, Vietnam, Pakistan, and the United States.
It is reported that rice and broken rice varieties other than Indian fragrant rice are affected by this ban, accounting for nearly half of India's total rice exports last year. These are also varieties with lower prices, mainly exported to African countries such as the Philippines, Indonesia, and Benin, Angola, Cameroon, etc.
Indian fragrant rice, which is not affected by exports, is a type of long grain fragrant rice mainly exported to the Middle East and Europe, with higher prices.
This is not the first time the Indian government has taken action on rice. Last September, India imposed a 20% export tax on rice other than steamed rice and Indian fragrant rice, and banned the export of broken rice to ensure domestic food supply. It was not until November 29th that the restrictions were lifted.
Alleviate domestic inflation in India
Why is the Indian government restricting rice exports?
Reuters reported that India's export ban demonstrates the sensitivity of the Modi government to domestic food inflation issues before next year's Indian elections.
The Indian government claims that the retail price of Indian rice has increased by 11.5% in the past 12 months. The monsoon and heavy rainfall in India have also greatly affected domestic crop yields, with rice prices soaring by 3% again in the past month.
Consumer News and Business Channel in the United States pointed out that due to bad weather, prices of grains, vegetables, and fruits in India have been rising recently, and tomato prices have even tripled.
According to previous reports, due to the delayed arrival of monsoon rainfall this year, India experienced severe rainfall shortages until mid June. At the end of June, although heavy rain arrived late, the uneven distribution of rainfall also brought new hidden concerns.
In Punjab, Haryana and other regions in northern India, known as the "granary", the rainstorm in the past few weeks is causing the newly planted crops to be flooded. Many farmers have to wait for the water level to drop before replanting crops. But in some other major rice growing areas, there is a problem of insufficient rainfall, even though farmers have already raised seedlings, they are unable to proceed with the next step of transplanting work.
Therefore, despite the Indian government raising rice purchase prices, as of now, the rice planting area in India has still decreased by 6% compared to 2022.
Will exacerbate the global rise in rice prices
Rice is the staple food for over 3 billion people worldwide, so any disturbance related to rice will have a huge impact on the international food market.
Public opinion points out that global rice prices are currently hovering at a 10-year high.
Since the Russia-Ukraine conflict, tensions in the Black Sea region have escalated. The prices of major grains, including wheat and barley, have further risen, making rice an attractive alternative. However, this has also led to tighter supply and higher prices.
In addition, the heavens are not beautiful, and the El Ni ñ o phenomenon is making a comeback after a 7-year hiatus, which usually leads to reduced rainfall and damage to crops.
Analysts believe that although the latest ban in India may lower domestic rice prices, it will lead to further increases in already high global rice prices. This will exacerbate food insecurity and have a negative impact on some low-income food deficient countries.
Eve Barre, an economic expert at trade credit insurance company Conface, believes that in addition to a decrease in global rice supply, panic reactions and speculative behavior will also exacerbate price increases.
Chairman of the Indian Rice Exporters Association B V. Krishna Rao said that India's move will disrupt the international rice market much faster than the impact of the Russia-Ukraine conflict on the wheat market.
Rao believes that the sudden ban on exports in India is "very painful" for buyers as they are unable to quickly find other sources of imports. Due to insufficient inventory in other rice exporting countries such as Thailand and Vietnam to fill the gap, African buyers may be most affected by the Indian ban.
