Steadily climbing rice prices following India’s ban on exports of non-basmati white rice and amid dry weather in Thailand has sparked inflation concerns in Asia and Africa, where the foodgrain is a staple.
Benchmark Thai white rice, 5% broken, jumped on Wednesday to $648 per tonne, up from $627-630 a week ago, data from the Thai Rice Exporters Association showed.
India’s 5% broken parboiled variety, which was quoting at a record $450-$455 per ton a week ago, rose further to $468-472 on Wednesday, data showed.
India is a top producer and exporter of rice, accounting for 37% of the total rice exported globally. Other countries may not be able to meet this supply vacuum, sparking fears of inflation in importing countries, ratings firm India Ratings and Research (Ind-Ra) said in a recent report.
Non-basmati rice constitutes 80% of the total volume of rice exported from India.
Fearing a similar ban on basmati, countries that import the rice variety are seeking early shipments, which may keep prices elevated in the short term, Ind-Ra said, adding that many farmers have shifted to production of basmati to take advantage of the higher prices.
“The trigger for the ban in mid-July was the impact of Cyclone Biparjoy. The government feared that torrential rains just ahead of sowing season would adversely affect the rice crop, posing a danger to food security,” Vinod Kumaar Kaul, senior executive director at the All India Rice Exporters’ Association (AIREA), said.
To shore up foodgrain supplies and tackle domestic inflation, Union food secretary Sanjeev Chopra on Wednesday said the government would sell 5 million tons (mt) of wheat and 2.5 mt of rice in the open market.
The government has also brought down the reserve price of rice by ₹2 to ₹29 per kg to tame inflation, Chopra added.
India’s rice production grew at a compound annual growth rate of 2.6%, while consumption rose 1.3% in the past decade, the report said.
India has seen an increase in surplus since 2016-17, but the decision to ban non-basmati rice exports hit traders.
“The spontaneous implementation of the ban led to financial stress as consignments that were in the pipeline and had to be recalled,” AIREA’s Kaul said.
“But weather conditions have improved now, leading to a V-shaped recovery in acreage under rice sowing. This augurs well for us, though the government is maintaining a strict vigil. The next few weeks will be crucial for exporters,” Kaul said.
India exports rice to about 150 nations and several countries, particularly in Africa, rely on India for their food security, Kaul added.
Russia’s invasion of Ukraine that began February last year had sent the prices of several commodities, including cereals, soaring. As wheat prices also surged amid the war, India banned exports of the essential commodity in May last year. This June, the government set stock limits on wheat for the first time in 15 years to prevent hoarding and control prices.
The six-member monetary policy committee of the Reserve Bank of India (RBI) is expected to maintain a status quo on policy rates and monetary stance when it meets on Thursday.
The prospects of an RBI rate cut this year look bleak amid a sharp rise in vegetable prices and the interest rate hikes by the US Federal Reserve.