India’s Export Restrictions on Rice Impacts Global Prices: Asian Market in Turmoil
Published on: May 8, 2024.
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Rice Exporters Prepare for Potential Tender in Indonesia
The Asian rice market is bracing itself as top exporters anticipate a possible tender from Indonesia’s state purchasing agency, Bulog, in May. This comes as a direct result of India implementing export restrictions, which have significantly tightened global rice supplies.
Export Ban Causes Ripple Effect
In August 2022, India, the world’s largest rice exporter, imposed export restrictions that included banning broken rice exports and imposing additional duties on non-basmati white rice outflows. By July 2023, the Indian government further restricted non-basmati white rice exports, imposed a 20% duty on parboiled rice outflows, and set a minimum export price for basmati at USD 950 per metric ton.
These restrictions have had a profound impact on the market, leading Asian rice exporters to turn their attention to Bulog’s potential tender in May.
In the marketing year 2022-23, India accounted for nearly half of the global rice trade, with exports totaling 20.25 million metric tons. However, this figure was 9% lower than the previous year’s exports. While India primarily exports parboiled rice to West African nations, its basmati rice is predominantly shipped to the Middle East.
With India’s restrictions constraining the market, Asian rice exporters are eagerly awaiting Bulog’s upcoming tender.
Since the start of 2024, Bulog has announced four tenders, purchasing a total of 1.4 million metric tons. Vietnam, Thailand, Myanmar, and Pakistan have been the top suppliers to Bulog this year.
For 2024, Bulog has set an import quota of 3.6 million metric tons, a decrease from the previous year’s 3.8 million metric tons. This reduction is due to prolonged dry conditions caused by the El Nino weather pattern, which has resulted in lower yields and output in Southeast Asia, further tightening global rice supplies.
Prices Rise Despite Stagnant Demand
Exporters from various countries are anticipating a surge in rice prices with the impending Bulog tender. A Pakistan-based exporter stated, “Vietnamese and Thai rice prices are firming up as Bulog’s tender is around the corner [in May].” Another exporter mentioned, “There are talks of a mid-May Bulog tender.” Bulog’s tenders often lead to price surges during purchase announcements, offering more market stability compared to supply cuts, as stated by trade sources.
On May 6, Platts, part of S&P Global Commodity Insights, reported Vietnamese 5% broken white rice Free On Board (FOB) at USD 569 per metric ton, which rose by USD 5 per metric ton from the previous week.
Despite stagnant demand, global rice prices have been on the rise in recent years due to supply cuts caused by dry weather conditions and restrictive government policies.
Asian rice fields have been impacted by drought conditions associated with the El Nino climatic phenomenon, which is characterized by warmer-than-average ocean surface temperatures in the central and eastern tropical Pacific Ocean.
Bulog has not yet provided any comment regarding its next tender announcement, but exporters are prepared for further market volatility as the situation develops.
Source: Free Press Journal
