Rice Export Ban in India
India has just issued an order to ban all exporting of non-basmati white rice. This takes immediate effect on 20th July 2023.
India's role as the world's largest exporter of rice, with over 40% of global rice exports, is significant in the global food market. The decision to halt rice exports may lead to potential concerns for exporters with low inventories. It could potentially result in further inflation of food prices.
This situation arises amid existing high food prices, influenced by the impact of Russia's invasion of Ukraine last year and unpredictable weather patterns.
This category impacted, non-basmati white and broken rice, accounted for about 10 million tons of the total 22 million tons of Indian rice exports last year. However, the government clarified that parboiled rice, representing 7.4 million tons of exports in 2022, would not be affected by the ban.
Why did India Ban Rice Exports?
The Indian rice export ban is a response from the Indian government to tackle the problem of significant crop damage caused by the late but heavy monsoon rains in India.
The India rice ban on non-basmati white rice is aimed at ensuring sufficient availability of the grain in the Indian market and controlling the rise in domestic prices. According to Reuters, the Indian food ministry has reported an 11.5% increase in rice retail prices over the last 12 months, attributing this rise to a scarcity of rice.
This measure is taken to prioritize domestic needs and stabilize the food market amid concerns of scarcity and increasing costs.
The decision reflects the Indian government's sensitivity to food inflation ahead of an upcoming general election. Prime Minister Narendra Modi's administration previously banned wheat exports and curbed rice shipments in September 2022. Additionally, sugar exports were capped this year due to lower cane yields.
India’s Ban on Rice Export and Its Impact on Global Rice Market
The sudden ban on rice exports from India could have significant impacts on the global rice market. Rice is a staple food for more than 3 billion people, with nearly 90% of the crop produced in Asia.
The El Nino weather pattern in the region often leads to lower rainfall, affecting rice production. Already, global rice prices are at their highest level in 11 years.
Reuters reported that B.V. Krishna Rao, president of the Rice Exporters Association said that "India would disrupt the global rice market with far greater velocity than Ukraine did in the wheat market with Russia's invasion."
Rice buyers who relied on Indian non-basmati white rice may face difficulties finding alternative sources, and the ban could disrupt the rice trade worldwide. The move is likely to be closely monitored by market participants. Additionally, rice-exporting countries might face challenges in meeting the demand gap created by India's decision to ban rice exports.
Who Are the Biggest Buyers of Rice from India?
The halt in India's non-basmati white rice exports is expected to have significant implications for rice buyers worldwide. Reuters reported that although Thailand and Vietnam would lack sufficient inventories to fill the supply gap created by India's decision, but African countries would be the most affected by it.
Many countries, including African nations, are likely to urge India to reconsider its ban and resume rice shipments to meet their domestic demand. Besides African countries, other major buyers of Indian rice include Benin, Senegal, Ivory Coast, Togo, Guinea, Bangladesh, and Nepal.
Although the ban is set to be effective from 20th July 2023 but vessels that are already under loading would be allowed to proceed with their exports. This means that any shipments initiated before the ban's implementation date will still be permitted to be delivered to their respective destinations.
Given the significant role of Indian rice in the global market and its importance for food security in many regions, the suspension of exports is likely to be closely monitored by international stakeholders, and there may be continued efforts to find a resolution to address the supply challenges.
Rice Market News
According to Reuters, heavy rainfall in northern parts of India has caused significant damage to newly planted crops in states such as Punjab and Haryana. Rice paddy fields in these regions have been submerged for over a week. This is leading to the destruction of newly planted seedlings and necessitating the replanting of crops once the waters recede.
In other major rice-growing states, farmers have faced challenges in transplanting seedlings due to insufficient rainfall. Despite the expectation of an increase in rice cultivation area following New Delhi's decision to raise the rice purchase price, farmers have planted rice on an area that is 6% smaller than the previous year.
Rice Prices
Amidst these weather-related supply concerns, Reuters reported that rice prices for exports from Vietnam have surged to their highest levels in over a decade due to El Nino effects. Vietnam is the world's third-largest exporter after India and Thailand.
Vietnam's 5% broken rice was offered at $515-$525 per metric ton, reaching its highest price since 2011. Similarly, India's 5% broken parboiled rice variety hovered near a five-year peak at $421-$428 per metric ton.
Buyers may seek alternatives from other major rice-exporting countries like Thailand and Vietnam. However, prices for rice exports from them are also likely to surge and could reach as high as $600 per metric ton. This is significantly higher than previous prices.
This price increase may pose challenges for countries like China and the Philippines, who traditionally import rice from Vietnam and Thailand. These nations will likely be forced to pay substantially higher prices for rice imports, putting additional pressure on their food markets and potentially leading to higher food inflation.
The supply shortfall created by India's export ban, coupled with the growing demand from other countries, may lead to a tighter rice market and further price spikes. Buyers and import-dependent nations will need to adapt to the changing market dynamics and navigate the challenges posed by the rising cost of rice imports.
Trading CME/CBOT Rough Rice Futures
Traders can trade Rough Rice Futures on the Chicago Mercantile Exchange/Chicago Board of Trade (CME/CBOT) through Orient Futures Singapore.
The Chicago Board of Trade (CBOT) offers many commodity futures that are up for trade. These commodities include corn, soybeans, soybean oil, and rough rice.
Orient Futures Singapore is overseas intermediary of Shanghai Orient Futures, and offer trading across many different exchanges, such as Dalian Commodity Exchange (DCE), Shanghai International Energy Exchange (INE), Zhengzhou Commodity Exchange (ZCE), and also Chicago Board of Trade (CBOT).
Start Trading With Orient Futures Singapore
Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.
Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore (ICE SG).
We provide premium customer service at an affordable cost to all our clients. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.