Grain to grain: why the world may experience a shortage of another product
India, the world's largest exporter of rice, is considering restrictions on its exports
That India – the world's largest exporter of rice – plans to introduce restrictions on the export of this product was reported by several world media at once, referring to Indian officials. There are currently no official confirmations, but the information seems quite plausible: in May, the Indian authorities already imposed a ban on exporting of wheat, later – on exporting sugar, and just last week limited the flour trade. The purpose of the embargo in all cases is to struggle with rising prices in the domestic market. Who will be most affected by such a step and how might it affect global trade?
Why may the restrictions on rice exports from India occur?
In the case of rice, the government is concerned about the reduction in the area of rice fields to 34.37 million hectares due to adverse weather conditions. This is 8.3% less than a year earlier.
According to the USDA forecast, India's rice production in the 2022-2023 crop year may decline for the first time since 2015-2016. Export prices of rice from India increased by 12% to $2.6 billion in the 1st quarter of this fiscal year compared to the previous one.
As a countermeasure, the government is considering restrictions on exports of broken rice, which accounts for nearly 20% of India's exports.
How exactly will exports be limited?
It is assumed that the restrictions will act in the form of an export duty. “We prefer an export tax of 10-15% on broken rice shipment instead of imposing an outright ban,” stated representatives of the All India Rice Exporters Association.
It is especially emphasised that the ban will not affect other types of rice, as the country has formed significant reserves – the state-run Food Corporation of India had 41 million tonnes of this grain crop as of August 1.
Broken rice is mainly used as feed in poultry farming, for the production of ethanol, and in some poor countries (mainly African) it is consumed as a food.
Who was the most active buyer of broken Indian rice?
Over the past decade, India has been the world's largest exporter of rice with a market share of 40%. In 2020–2021, export revenue from the rice trade amounted to $8.8 billion and $9.6 billion. This exceeds the revenues from shipments of other three largest exporters – Thailand, Vietnam, and Pakistan – taken together.
In 2021, India exported 21.5 million tonnes of rice, including 3.6 million tonnes of broken rice. The largest buyers are China, which purchased 1.1 million tonnes in 2021, as well as Bangladesh, Benin, and Nepal.
African countries such as Senegal and Djibouti bought broken rice for human consumption.
How will restrictions on Indian rice exports affect food security?
Any restrictions applied by a player with a market share of 40% inevitably affect the global situation. An increase in rice prices in the event of an Indian embargo is inevitable.
When India imposed restrictions on rice exports in 2008, prices soared above $1,000 per tonne. This time, such a move could once again worsen the chaos in world food markets and deliver another blow to the most vulnerable countries.
It is noteworthy that during the spring price rally for food products, it was rice that remained a stronghold of stability. While wheat and corn prices were breaking records, rice prices were reduced due to large stocks of rice.
India's rice exports, according to USDA forecasts, were projected to increase to a record 22 tonnes in 2022-2023 and account for 40% of global supplies.
Domestic consumption of rice in India for 2022-2023 is 108.4 million tonnes. The country's production of this product increased to a record 130.29 tonnes in the 2021-2022 agricultural year (July-June), which is almost 5% more than the amount of rice produced during the previous agricultural year. The forecast for this season is still being refined, but the discussions are focused only on the level of the crop decline.
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