Food supplies, already squeezed by shortages of wheat, maize and cooking oils, are likely to be further disrupted, this time by the rice market.
India is clamping down on exports of the staple food for half the world’s population, with the market now focusing on the ability of other major producers, including Thailand and Vietnam, to fill the void. The restrictions threaten to trigger inflation for another key commodity and could deprive some of the world’s poorest nations of a crucial part of their diet.
India is the largest exporter with a 40% share of world rice trade. The government imposed a 20% tariff on shipments of white and brown rice and banned the sale of broken rice overseas. These varieties are mainly used to feed Asia and Africa and affect about 60% of India’s total rice exports.
“Such severe global supply disruptions, combined with record high consumption around the world, are expected to drive up” prices and fuel food inflation further, said Sabrin Chowdhury, head of commodities at Fitch Solutions. When war in Ukraine sent agricultural prices skyrocketing earlier this year, rice escaped the frenzy, keeping Asia and parts of the Middle East and Africa safe from a food crisis. worse. The rise of maize and wheat has encouraged some substitution of these more expensive cereals for cheaper alternatives such as rice. That may be about to change.
According to Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, India’s policy will drive up its export prices to levels similar to the white rice qualities of its Thai and Vietnamese rivals, prompting buyers to turn to these suppliers.
When that happens, it will also push up Thai and Vietnamese prices, dealing a blow to importing countries in Asia and Africa that consume the grain as a staple, Chookiat said. “Imposing a 20% tax is a big deal,” he said. “This decision will lead to a recovery in world rice prices.”
Thailand’s benchmark 5% white rice was quoted at $431 a tonne this week by the exporters association, while Vietnam’s same grade was around $393-397 a tonne. India’s prices were well below that, at around $338 to $342.
While Thailand and Vietnam recently agreed to cooperate to raise prices, without providing details, Chookiat said Thailand is unlikely to restrict exports as the country has a surplus and there is no concerns for local supplies.
Thailand usually produces around 20 million tonnes of milled rice per year, of which 11 million is consumed and the rest exported.
Chookiat said it was impractical to curb overseas sales because the surplus, if not sold, would hurt domestic prices and impose storage costs and subsidies on farmers on the government. In 2007-08, a global food crisis was triggered when India and Vietnam restricted rice exports. Prices soared above $1,000 a tonne, more than double the current level, amid a supply panic.
Nguyen Nhu Cuong, head of Vietnam’s agriculture ministry’s agricultural production unit, declined to say whether the country would cut exports, but said domestic supply and national food security must be taken into consideration when of making such a decision. Vietnam is able to ship 7 million tonnes of rice this year, against an earlier forecast of around 6.7 million tonnes, he said.
Overall, production in several regions was affected by bad weather. In addition to India, which has seen its seedlings fall due to lack of rain, the Chinese harvest is threatened by the heat. European production is expected to be the lowest since 1995-96 due to severe drought in Italy and Spain, while a similar trend is seen in the United States, Chowdhury said.