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India’s Rice export ban and its global impact

Impact of India's rice export ban

India’s ban on some rice exports is causing a global ripple effect. In July, India decided to halt the export of non-basmati white rice, following a ban on broken rice that had been in place since September the previous year. While these measures were initially driven by domestic concerns such as rising food prices, inflation, and fears of a rice shortage due to El Nino disruptions during the festive season and upcoming elections, their consequences have now reverberated worldwide, resulting in surging prices.

Where India Stands

India, the largest rice exporter globally, accounted for nearly 40 percent of the world’s rice trade in 2022. This included various types of rice, such as basmati rice, parboiled rice, non-basmati white rice, and broken rice. Despite the bans, India continues to export parboiled and basmati rice to honor its international commitments. However, the bans have caused global rice prices to spike by 15-25 percent. The most severely affected are those in countries like Bangladesh, Nepal, and African nations like Benin, Senegal, Togo, and Mali. These countries heavily rely on Indian white rice and imported broken rice, which is the most affordable and filling variety.

Before India’s export bans, international grain prices were already soaring due to Russia’s conflict in Ukraine. The situation escalated when Russia withdrew from the Black Sea Grain Initiative, which would have facilitated Ukrainian grain exports to global markets. Moreover, there is now growing concern that countries like Thailand, Vietnam, and Pakistan, accounting for 30 percent of global rice sales, may also impose export bans if El Nino adversely affects their rice crops, marking its return for the first time in seven years.

The impact

Traders and scientists emphasize that a rice shortage, a staple for over half of the world’s population, will have a cascading effect on wheat, soybeans, corn, and maize – all used as rice substitutes in both human consumption and animal feed. This could lead to a chain reaction affecting the demand and prices of not only other food items but also fuel.

So, why did India ban rice exports? Although India produces around 135 million tonnes of rice annually, more than enough to meet its domestic demand, rising global prices – up more than 10 percent in the past year – prompted the Indian government to impose the latest export ban. This was seen as a measure to curb domestic prices and as a precautionary step in case El Nino adversely affects standing rice crops. However, domestic prices remain high, prompting the government to announce plans to release 2.5 million tonnes of rice into the open market to stabilize prices. Given the upcoming state and national elections, keeping prices low is politically crucial for the ruling government, so the export ban is likely to persist until then.

The panic caused by the export ban has been evident even in countries like the United States and Canada, where Indian expatriates accustomed to consuming Indian rice have resorted to panic buying. In these developed markets, where 80 percent of rice consumption is basmati rice, the impact on food budgets is limited. However, in the Middle East and North Africa regions, as well as in certain West African and Asian countries, where rice constitutes a significant portion of food budgets, panic is setting in.

In nations like Nepal, Bangladesh, and several African countries, where rice accounts for over half of the food budget, the situation is dire. Furthermore, countries like the Philippines and Indonesia, facing adverse climate conditions due to El Nino and other climate change factors, are also experiencing disruptions in agriculture and fisheries. This, in turn, can lead to a shift in consumption patterns, with people turning from fish to meat, affecting corn demand (used as cattle feed), ethanol production, fuel prices, transport costs, and ultimately, vegetable prices.

Rice prices in Vietnam have reached their highest level in 15 years, and Nepal has witnessed a 16 percent surge in rice prices since India’s ban announcement. The Philippines, the world’s second-largest rice importer after China, is grappling with extreme weather conditions, including typhoons, while Indonesia is experiencing fisheries and tourism challenges due to El Nino-induced ocean heatwaves. This complex interplay of factors threatens not only rice prices but also the prices of other commodities and even fuel.

Rice production in Asia accounts for 90 percent of global production, and the vulnerability of paddy in Asia to El Nino, a climate pattern driven by the warming of the eastern Pacific Ocean, poses significant risks. In addition to El Nino, global warming has led to extreme weather conditions, further complicating the situation. India, for instance, relies heavily on the monsoon crop, which accounts for about 80 percent of its total rice production. Any disruption in rainfall during this critical period could lead to a drought affecting a substantial portion of the country’s rice production.

The weather factor

Southeast Asian countries like Indonesia are particularly susceptible to El Nino’s effects. Climate experts warn that not only El Nino but also other climate change-related extreme weather events can disrupt agriculture. This heightened vulnerability has prompted rice-producing and exporting countries to create stockpiles in anticipation of potential shortages. However, there are concerns that these countries may also impose temporary restrictions on rice exports, similar to the situation in 2007-2008 when rice prices tripled due to export bans initiated by Vietnam, India, and Cambodia.

Needless to say, India’s ban on rice exports, driven by domestic concerns, has triggered a chain reaction in the global rice market, leading to increased prices and potential disruptions in other commodity markets. The situation is exacerbated by the return of El Nino and climate change-related challenges. While India’s decision aims to stabilize domestic prices, its consequences are far-reaching, impacting nations heavily reliant on Indian rice and creating concerns about food security and price stability on a global scale.

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