Global frenzy for rice! Is the cause India again? Rice | Export | Global

Introduction: India is the world's largest exporter of rice.

Recently, many Indian Americans in the United States rushed to supermarkets to grab rice, forming a queue of 100 people in front of the cash register. Due to a shortage of supply, a bag of 20 pound rice has been pushed up from $16 to $50 in some supermarkets.

Not only that, Indian Americans in countries such as Canada and Australia are also frantically buying rice. The reason is that the Indian government recently announced that in order to ensure domestic market supply, India will ban the export of rice other than steamed glutinous rice and Indian fragrant rice, with immediate effect. Indian rice is an essential food for many Indian people in their daily lives, and they hoard it on a large scale due to concerns about running out of food from now on.

India is an important exporter of rice in the world, accounting for over 40% of the world's rice exports. For Indian Americans living in Western countries, even if there is a shortage of rice supply in India, there are still many other options available. But many Asian and African countries are highly dependent on India's rice supply, and a shortage of Indian rice may mean a shortage of rice, which will exacerbate the global food security crisis.

Rice planted in a small town near the capital of Madagascar, Tananarivo, is being harvested. Information from Xinhua News Agency

However, India's ban has limited impact on the domestic market in China. Mi Jian, Associate Researcher of the School of Economics and Trade at Zhongkai College of Agricultural Engineering and Director of the China Association for Agricultural Green Development, told a reporter from First Financial News that China's main grains such as rice, wheat, and corn are basically self-sufficient and not heavily imported. The overall grain prices in China are limited by the influence of the international grain market.

Indian Rice Ban

The Indian Ministry of Consumer Affairs, Food and Public Distribution announced on July 20th that the strong monsoon rainfall has caused serious damage to crops, and the government has decided to implement restrictions on rice exports after retail prices of rice rose by 3% within a month.

This ban mainly targets white rice and broken rice, and semi cooked steamed rice and Indian fragrant rice are not within the scope of this ban. Indian fragrant rice, also known as Basmatimi, is mainly exported to the Middle East and European markets, with higher prices. The ban will come into effect on the day of its announcement, but the rice that has been loaded for transportation is still allowed to be exported.

When it comes to Indian food, many people associate it with curry and handmade rice. India is an important producer of rice. In 2022, India's total rice exports were about 22 million tons, accounting for over 40% of the world's rice exports, while the rice exports affected by this export ban were about 10 million tons.

In the past year, the retail price of Indian rice has risen by as much as 11.5%. In fact, the Indian government has also frequently regulated the domestic market and implemented restrictions on grain exports in the past. In September 2022, the Indian government banned the export of broken rice and imposed tariffs on white and brown rice exports in order to stabilize domestic rice prices. It was not until the end of November of that year that it announced the lifting of most of the rice export restrictions.

Affected by climate change, the annual monsoon in India has been particularly irregular this year, disrupting agricultural production. In the past few weeks, Indian Punjab and Haryana have experienced rainstorm, and the seedlings were completely destroyed after soaking in rice fields for more than a week. Local farmers can only wait for the next planting season to sow; In other parts of India, the lack of precipitation makes it difficult to transplant rice seedlings in rice fields.

This is a photo taken on July 10th of the swollen Bias River in the Mandi region of the Indian state of Himachal Pradesh. Xinhua News Agency

Indian agricultural policy expert Sharma said that due to the possibility of the El Ni ñ o phenomenon continuing into the second half of 2023, rice growing areas in southern India will continue to face the risk of drought and little rain. Therefore, the Indian government is taking a very cautious approach, attempting to anticipate potential production gaps in the future.

Meanwhile, due to factors such as extreme weather and pests and diseases, the price of Indian tomatoes has increased sevenfold in many places. As an indispensable vegetable variety in the "basket" of Indian people, the shortage of tomatoes has affected their daily diet and also led to some cases of competition for tomatoes.

Economists predict that if the prices of major foods such as rice, tomatoes, and onions continue to rise, India's inflation rate will only increase without decreasing. The significant surge in food prices in India will lead to an increase in public dissatisfaction, which in turn will affect the decision-making of the government's financial sector and even impact political stability.

Taking onions as an example, there have been many cases in Indian history where political parties lost elections and officials stepped down due to the "onion crisis", so it is also known as a "political vegetable" in India. India will hold several local elections this year and a general election in 2024. The rising cost of living undoubtedly brings enormous political pressure to the Indian government.

Global market volatility

China is the world's largest rice producing country, with consecutive bumper harvests of rice. The overall market supply and demand are loose, and consumption is relatively stable. Therefore, the impact of India's rice ban on the supply and prices of the Chinese market is minimal.

China mainly imports broken rice from India. According to Chinese customs data, in 2022, China imported 2.0187 million tons of broken rice from India, accounting for 92.6% of the imported rice from India. The price of broken rice in India is lower than that of similar products in China. It is mainly used in feed production, Baijiu production and snack production, rather than food security.

For the global market, it is another picture.

At present, climate change and the conflict between Russia-Ukraine conflict have had a double impact on food security. India's rice export ban will further increase the pressure on the global food market.

In Kihanga County, Bubanza Province, Burundi, farmers hold hybrid rice grains in the field. Information from Xinhua News Agency

Krishna Rao, President of the Indian Rice Exporters Association, stated that African countries such as Benin, Senegal, and Cote d'Ivoire are particularly affected by restrictions on Indian rice exports. Indian rice is the cheapest among major rice exporting countries, which to some extent ensures that the aforementioned African countries can purchase relatively cheap food.

Indian rice is exported to over 140 countries and regions, mainly distributed in Asia and Africa. After the ban was announced, Asian countries are also taking action. On July 28th, the Singapore Food Authority stated that it is closely contacting the Indian government to seek exemptions for rice exports.

The Singapore Food Authority stated that Singapore imports rice from over 30 countries and regions, and India's ban has affected approximately 17% of rice imports. The Food Bureau stated that the government and businesses will strive to minimize the impact and Singapore will not experience a food shortage.

Philippine President Marcos also stated on July 29th that he is concerned that the arid climate caused by El Ni ñ o may have a potential impact on the country's rice harvest, and he may seek to reach a supply agreement with the Indian government to increase rice inventories. Although the Indian government has issued a ban on rice, it often gives the green light to transactions between governments. The Philippines is the largest net importer of rice in Asia, and its food is not self-sufficient. Over 20% of the country's rice consumption demand relies on imports.

The ban from India is not bad news for rice exporting countries Vietnam and Thailand. After the news was released, the export prices of rice from Vietnam and Thailand skyrocketed.. Specifically, the price of 5% broken rice in Vietnam reached $550-575 per ton on July 27th, compared to $515-525 before the ban, the highest level since 2011. The price of 5% broken rice in Thailand has also increased by about $60 per ton, reaching a new high in 11 years.

According to the forecast of the Ministry of Agriculture and Rural Development of Vietnam, the export volume of rice from Vietnam will reach 7.2 million tons in 2023, generating over 4 billion US dollars in foreign exchange. This will set a historical record for Vietnamese rice exports, mainly due to the sharp rise in rice prices.

Coincidentally, the UAE Ministry of Economy also announced on July 28th a suspension of the export and re export of UAE rice. According to relevant resolutions, the country will suspend rice exports for 4 months and apply to all rice varieties, including brown rice, whole polished rice, or semi polished rice.

The Russian government also announced on July 29th that it has decided to continue temporarily banning the export of its own rice and broken rice until December 31st of this year to ensure the stability of the domestic market.

Affected by this year's El Ni ñ o phenomenon, the rice price index released by the Food and Agriculture Organization of the United Nations in early July showed that global rice prices are hovering around an 11 year high. The ban on rice exports in India has raised concerns in the market about further exacerbation of global food inflation.

Although neither the United Arab Emirates nor Russia are important rice exporting countries, the two countries have made similar decisions coincidentally, reflecting the tense supply situation in the international rice market. Finally, the weaker side of the market has to pay a greater price to have enough to eat.