India, the world’s largest exporter of rice, has ordered a halt to its largest rice export category, which is expected to roughly halve rice shipments from the country. The government imposed a ban on non-basmati white rice after retail rice prices surged by 3 percent in just a month due to late but heavy monsoon rains causing significant damage to crops.
As India accounts for more than 40 percent of global rice exports, any cut in shipments could exacerbate the inflation already present in global food markets, driven up by Russia’s invasion of Ukraine and erratic weather. The ban specifically targets the non-basmati white and broken rice category, which represented around 10 million tons of India’s total 22 million tons of rice exports last year. However, the government clarified that parboiled rice, which made up 7.4 million tons of exports in 2022, is not included in the ban.
This move reflects the Indian government’s sensitivity to food inflation as it approaches a general election next year. In the past, Prime Minister Narendra Modi’s administration extended a ban on wheat exports and curbed rice shipments in response to rising prices. Earlier this year, it also capped sugar exports due to reduced cane yields.
The sudden ban on exports is expected to have significant impacts on buyers, particularly in Africa, as other major exporters like Thailand and Vietnam do not have sufficient inventories to offset the shortfall. Many countries are likely to urge India to resume shipments. Major buyers of Indian rice include Benin, Senegal, Ivory Coast, Togo, Guinea, Bangladesh, and Nepal.
The ban will be effective from July 20, but vessels that were already under loading at the time will be allowed to proceed with their exports.
The heavy rains in northern parts of India have caused damage to newly planted crops in states like Punjab and Haryana, leading many farmers to replant. Rice paddy fields have been submerged for over a week in northern states, destroying newly planted seedlings and forcing farmers to wait for waters to recede before replanting. In other major rice-growing states, farmers have prepared paddy nurseries but have been unable to transplant seedlings due to inadequate rainfall.
This situation has resulted in a decrease in the area under rice cultivation, which was expected to increase after New Delhi raised the rice purchase price. However, farmers have so far planted rice paddy on an area 6 percent smaller than in 2022.
In response to the supply concerns arising from El Nino weather patterns, rice prices from Vietnam, the world’s third-largest exporter after India and Thailand, have surged to their highest level in over a decade. Vietnam’s 5 percent broken rice was offered at $515-$525 per metric ton, its highest price since 2011. India’s 5 percent broken parboiled variety reached a near five-year peak at $421-$428 per metric ton.
Buyers may turn to Thailand and Vietnam, but their 5 percent broken rice could cost around $600 per metric ton, according to European traders. China and the Philippines, who generally buy Vietnamese and Thai rice, will also be compelled to pay substantially higher prices. The situation is likely to have a significant impact on global food prices and supply.