In response to surging retail rice prices and widespread crop damage caused by late monsoon rains, India, one of the world’s top rice exporters, has taken the bold step of banning the export of non-basmati white rice with immediate effect. This move has raised concerns in the global market, as India accounts for over 40% of all rice exports worldwide, and any cut in shipments could potentially fuel food prices and exacerbate existing supply chain challenges.

The decision was prompted by a 3% increase in retail rice prices within a month due to the adverse effects of the delayed monsoon season. While the rains arrived late, heavy downpours since then have resulted in substantial damage to crops. As a result, the country is facing low inventories, and the ban aims to ensure sufficient availability of non-basmati white rice in the Indian market while alleviating price pressures.

The ban comes at a critical time for India’s Prime Minister Narendra Modi, as it demonstrates his administration’s sensitivity to food inflation concerns ahead of the upcoming general election. In addition to restricting rice exports, the government has previously imposed bans on wheat exports and capped sugar exports due to adverse agricultural conditions.

B.V. Krishna Rao, President of the Rice Exporters Association, has compared the potential impact of India’s rice export ban to that of the Ukraine war on wheat supplies. With global rice prices already at an 11-year high, the sudden halt in India’s exports could significantly affect buyers, especially those in Africa, who may struggle to replace the shipments from other sources.

The ban has sparked worries among importing countries, with concerns that other major rice exporters like Thailand and Vietnam may not have enough inventories to compensate for the shortfall left by India’s absence in the market. Consequently, countries like China and the Philippines, which typically purchase Vietnamese and Thai rice, could be forced to pay substantially higher prices.

The heavy rains in northern regions of India have severely damaged newly planted crops, and many farmers have had to replant their fields. This year, the area under rice cultivation is expected to decrease slightly compared to the previous year. The situation is further compounded by El Nino weather patterns, which typically bring lower rainfall to Asia, affecting approximately 90% of the water-intensive crop’s production.

The ban on non-basmati white rice exports aims to stabilize domestic rice prices in India and mitigate the effects of food inflation. However, it remains to be seen how the global rice market will adapt to the sudden reduction in supply. Importing nations are likely to pressure India to resume shipments, while farmers and exporters assess the impact on their livelihoods and international trade dynamics.

As India grapples with these challenges, the world watches closely, aware that the decisions made by the top rice exporter will reverberate throughout the global food supply chain. In the coming weeks and months, stakeholders will closely monitor how the situation unfolds, with hopes for stable prices and sufficient food supplies for the billions of people who rely on rice as a staple food.

By: Montel Kamau
Serrari Financial Analyst
18th July 2023

photo source Google