India’s Shocking Move: How Banning Rice Exports Could Affect You

 

Introduction 

Rice is one of the most important and widely consumed food crops in the world, especially in Asia, where it feeds more than half of the population. But the global rice market is facing a major challenge as India, the world’s largest rice exporter, has banned a significant portion of its shipments to curb domestic inflation. The ban has sent shockwaves across the Asian rice market, where prices are expected to soar and trade is at a standstill. In this blog post, we will explore the reasons, impacts, and implications of India’s export ban on rice, and what it means for the future of the rice market.

Rice prices set to soar after India’s export ban, Asian market in limbo

Rice lovers may have to brace for higher prices as India, the world’s largest rice exporter, has stopped a big chunk of its shipments to rein in domestic inflation. The move has sent shockwaves across the Asian rice market, where traders are holding off deals and expecting prices to surge by up to $100 per metric ton or more.

India’s export ban, announced on Thursday, affects its most common rice category, which accounts for 40% of its total exports. The country is trying to tame its soaring domestic rice prices, which have reached multi-year highs in recent weeks due to erratic weather and rising demand.

The ban has left a huge gap in the global rice supply, as India normally ships around 15 million metric tons of rice annually, or about 40% of the world’s total. This has put pressure on other major rice exporters, such as Thailand and Vietnam, to fill the demand from key importers like China, Bangladesh, and African countries.

But with the dry El Nino weather pattern threatening to reduce rice production in Asia, where nearly 90% of the crop is grown and consumed by more than 3 billion people, the supply situation is tight and prices are likely to spike.

“Rice prices are going to go up further in the export market. We expect a minimum gain of around $50 a metric ton and it could be $100 or even more,” said a Singapore-based trader at an international trading company.

“Right now, everybody - sellers as well as buyers - are waiting to see how much the market goes up,” the trader said.

Another trader in Bangkok said he expected a similar rise in prices. The traders declined to be identified as they are not authorized to speak to the media.

“We haven’t heard of any trades done today but buyers will have to pay higher prices to get cargoes as India’s decision has taken out large volumes from the market,” he said.

The rice market is also closely watching the developments in the global wheat market, which has seen a sharp rally this week due to geopolitical tensions between Russia and Ukraine. Wheat is a substitute for rice in some regions and its price movements can influence rice demand and supply.

Global wheat prices jumped more than 10% this week, their biggest weekly gain in more than 16 months as Russian attacks on Ukrainian ports raised worries over global supply. [GRA/]

Rice prices in top exporting countries had already been rising before India’s ban.

Vietnam’s 5% broken rice was offered at $515-$525 per metric ton, its highest since 2011, before India’s late-Thursday announcement. [RIC/AS]

India’s 5% broken parboiled variety hovered this week near a five-year peak at $421-$428 per metric ton and Thailand’s 5% broken rice prices jumped to $545 per metric ton - their highest since February 2021.

The export ban is expected to last until March 2022, when India’s new crop will be harvested. But some analysts say it could be extended if domestic prices remain high or weather conditions worsen.

The ban could also have political implications for India’s Prime Minister Narendra Modi, who faces crucial state elections next year. Rice is a staple food for millions of Indians and any rise in its price could hurt its popularity among rural voters.

The ban could also affect India’s relations with its trading partners, especially China, which is its largest rice buyer. China imported 2.3 million metric tons of rice from India in the first 10 months of this year, up 66% from the same period last year, according to Indian government data.

China has been diversifying its sources of rice imports amid trade tensions with the United States and Australia. It has also been boosting its domestic production and stockpiling rice to ensure food security.

But with India’s export ban, China may have to look for alternative suppliers or tap into its reserves, which could affect its food inflation and foreign exchange reserves.

The ban could also have humanitarian consequences for some of the world’s poorest countries, such as Afghanistan, Yemen, and Somalia, which rely on Indian rice donations or low-cost imports to feed their populations.

According to the United Nations’ World Food Programme (WFP), more than 270 million people in Asia are facing acute food insecurity due to conflict, climate change, and Covid-19. The WFP said it needs $6 billion to provide food assistance to these people until June 2022.

The WFP said it is closely monitoring the impact of India’s export ban on its operations and is working with other donors and partners to ensure adequate supplies of rice and other food items for those in need.

Conclusion

Rice is one of the most important and widely consumed food crops in the world, especially in Asia, where it feeds more than half of the population. But the global rice market is facing a major challenge as India, the world’s largest rice exporter, has banned a significant portion of its shipments to curb domestic inflation. The ban has sent shockwaves across the Asian rice market, where prices are expected to soar and trade is at a standstill. In this blog post, we will explore the reasons, impacts and implications of India’s export ban on rice, and what it means for the future of the rice market.