Rice Production Declines for the First Time in 8 Years, Government Considers Extending Export Restrictions
Published on: November 2, 2023.
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Prolonged Export Curbs Could Cause Rise in Food Prices, says Indian Government
The Indian government is expected to extend restrictions on rice exports due to an expected decline in domestic rice production in 2023, marking the first decrease in eight years. This move is expected to help the government maintain control over food prices in the lead-up to the 2024 assembly elections. India, as the world’s largest rice exporter, caused global prices to skyrocket when it banned non-basmati white rice exports in July 2023.
However, the state of the crop is uncertain following unpredictable monsoon weather. Despite an increase in the area under paddy, output could fall by as much as 8 percent from last year’s record, according to various forecasts. The combination of lower output and consistently high domestic rice prices has left farmers and traders concerned that the government will prolong export restrictions.
One farmer in Uttar Pradesh, Ramkali Bhargav, mentioned that her paddy fields had recovered from weather challenges but heavy rain and winds flattened her rice crop just before harvesting. The crop loss is a problem for governments and consumers across Asia and Africa that have struggled to secure supplies of the staple since prices in the global market skyrocketed to a 15-year high after India restricted its rice exports, which account for 40 percent of global rice trade.
Prolonged export curbs could further inflate food prices, given the low inventories in other key exporting countries including Thailand, Vietnam, Pakistan, and Myanmar. A New Delhi-based dealer with a global trade house emphasized that with elections looming, the government’s sensitivity to food prices makes even a slight production dip enough to justify maintaining export restrictions.
In the year leading up to June 2023, India produced a record 135.76 million tonnes of rice. However, two leading global trade houses expect India’s rice output for the current crop year to drop by 7 percent and 8 percent, respectively, from the previous year. The US Department of Agriculture predicts a 3 percent decrease in India’s rice output, amounting to around 4 million tonnes, for the year ending in June 2024.
India’s Ministry of Agriculture & Farmers Welfare announced that production from the summer-sown crop could fall by 4 percent to 106.3 million tonnes and expects to provide an estimate for total output in its second report, typically published in February. Output from the soon-to-be planted winter crop is expected to drive a disproportionate share of the year’s decline.
Food inflation is a major concern in India, as the government has implemented various measures to control prices, including banning wheat exports, restricting sugar and onion exports, and allowing duty-free imports of pulses. Despite export restrictions, local rice prices remain almost 15 percent higher than a year ago. The government is considering extending a program that provides free or subsidized cereals to over 800 million people, with diminishing wheat stocks forcing increased reliance on rice.
The priority for the Indian government is to ensure ample rice supplies for subsidized distribution, and export considerations will only come after the general elections. If India continues the export ban, it could be challenging to bridge the supply gap, potentially leading to even higher prices.
In the fields, farmer Bhargav remains hopeful for a better return with the upcoming wheat crop.
(Source)
