Global Rice Prices Expected to Rise Further Due to Indian Export Restrictions and Supply Shortage
Published on: January 17, 2024.
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India’s Rice Export Curbs Cause Global Supply Shortfall, Experts Say
India’s recent restrictions on rice exports, including bans on broken and white rice, have created a shortfall of two million tonnes (mt) in the global market, leading to potential volatility in prices, according to experts and analysts. With global carryover stocks projected to decline by 5-8 mt, the impact of the supply gap is expected to be significant. S Chandrasekaran, a trade analyst based in Delhi, stated that India’s ban on white rice alone has resulted in a supply withdrawal of 4.67 mt, leaving a demand-supply gap of 2 mt after other rice exporting nations contributed an additional 2 mt to the market.
Despite these restrictions, India is predicted to remain the top exporter of rice in the 2023-24 period (August 2023-July 2024), according to the International Grains Council. They anticipate a 2% contraction in world trade, largely due to reduced buying interest from Asian importers, particularly Indonesia. However, India is expected to maintain its position as the largest exporter, even with a substantial decrease in shipments.
The US Department of Agriculture (USDA) has noted that India’s export restrictions are impacting different regions in varying ways, depending on the type of rice being shipped. While parboiled rice remains eligible for export with a 20% tariff, white rice and broken rice exports to Sub-Saharan Africa have experienced a rapid decline since the ban was implemented.
Pakistan, on the other hand, has seen a significant increase in rice exports. VR Vidya Sagar, Director of Bulk Logix, stated that Pakistan has made up for its losses in 2021 and 2022 by sharply increasing its exports in the 2023-24 season. Pakistan exported 2.6 mt of rice during this period, compared to 1.52 mt in the previous year, nearly doubling its foreign exchange earnings to $1.64 billion from $840 million.
Globally, rice stocks are dwindling, with inventories in Thailand decreasing by 4 mt. Overall, global ending stocks have decreased by 8 mt. In North Africa, rice stocks have dropped from 1.2 mt in 2020-21 to 0.6 mt. As a result of these decreasing stocks, buyers are turning to alternative varieties of rice, such as the brown variety, which is subject to a 20% export duty.
Since India banned white rice exports in July 2023, rice prices have risen by over 20%, according to data from the Thailand Rice Exporters’ Association. Chandrasekaran predicts that the combination of dwindling stocks in non-rice producing regions and a mismatch in supply will lead to continuous expansion and increased volatility in the Middle East and North Africa.
The USDA suggests that with global rice prices at a 15-year high, consumers may consider alternative domestic food options rather than seeking new rice suppliers. The reduced yield expectations in Asia’s dominant rice growers have led to a projected 1% contraction in global rice output for the 2023-24 season, potentially resulting in a softening of demand and tightening of stocks in key exporting countries.
Rice export restrictions were implemented by India to stabilize rising food grain prices and ensure domestic food security following a decrease in rice paddy crop yields caused by deficient rainfall in eastern regions in 2022 and the impact of El Nino in southern India in 2023. Kharif rice production for the current crop year ending in June is estimated to be 3.8% lower than the previous season, with a record high projection of rice production in 2022-23 not being met due to the non-availability of rice varieties consumed by the population, resulting in surging domestic prices.
Despite measures taken by the Indian government to control food inflation, rice prices have yet to show signs of easing due to a shortage of key varieties such as Sona Masuri and Ponni.
Source: The Hindu BusinessLine
