Categories: EconomyWorld

Top rice exporter India curbs shipments in threat to inflation

INDIA, the world’s biggest rice shipper, restricted exports of key varieties that mainly go toward feeding Asia and Africa, threatening to rattle global crop markets and exacerbate food inflation and hunger.

The government has imposed a 20% duty on shipments of white and brown rice, and banned broken rice sales abroad. The curbs apply to roughly 60% of India’s overall rice exports, according to Bloomberg calculations.

The moves by India, which accounts for 40% of the global rice trade, will put further pressure on countries that are struggling with worsening hunger and soaring food inflation. Rice is a staple food for about half of the world’s population, with Asia producing and consuming about 90% of global supply.

Rice is now the third major agricultural commodity in India to face restrictions on overseas sales this year. The South Asian nation has already curbed wheat and sugar exports, adding to a spate of food protectionism that’s exacerbated chaos in global food markets brought on by the war in Ukraine.

In contrast to the surge in wheat and corn prices after Russia’s invasion of Ukraine, rice has been subdued due to ample stockpiles, helping to ward off a bigger food crisis. With India’s latest move, that may be about to change.

The restrictions apply to unmilled and husked brown varieties, the government said late Thursday. Semi-milled and wholly-milled rice — or white rice — will incur a similar duty. Parboiled and Basmati rice are excluded from the curbs.

The variety that now attracts the export tax accounts for about 60% of India’s non-basmati rice shipments, according to BV Krishna Rao, president of the Rice Exporters Association. The restriction will benefit rival suppliers Thailand and Vietnam, he said, which are cooperating to shore up rice prices.

“The government’s move will boost global rice prices,” Rao said, estimating that export prices of white rice may exceed US$400 a tonne from as much as US$350 currently on a free-on-board basis.

Exporters will ask the government to waive taxes on about two million tonnes of rice that have been contracted but not yet shipped, he added.

Broken rice, which is banned for overseas sales, is mainly used for animal feed. Prices have jumped this year on increased export demand. Top buyers include China, which uses it for livestock feed, and some African countries that import it for food. It accounts for almost 20% of India’s shipments abroad.

India’s rice planting has shrunk 5.6% this season due to a lack of rainfall in some areas. Monsoon showers have been more than 25% lower than average in major growing states of Uttar Pradesh, Jharkhand and Bihar. Overall, the country has received 5% above normal precipitation during the period.

The trade restrictions will create supply concerns given that India is the single largest rice exporter, said Bloomberg Intelligence analyst Alvin Tai. “Definitely won’t help global food inflation but depends how long they keep it up.” – BLOOMBERG

Dayang Norazhar

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