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India’s decision to ban exports of rice adds to rising global food prices risks

India’s decision to ban exports of rice adds to rising global food prices risks
Wandile Sihlobo
By Wandile Sihlobo
21 Jul 2023
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When India announced a ban on rice exports this week, the common view was that India’s government is worried about inflation, ahead of the upcoming elections. Considering the importance of India in the global rice trade, we will all feel the impact of the ban.

India officially announced a ban on rice exports on Thursday 20 July. But it does not cover all rice categories as some analysts, myself included, initially feared. It is mainly a ban on non-basmati white and broken rice. Still, this affected category is significant. It accounts for 45% of the 22 million tonnes of rice that India exports to the global market annually. 

The rationale cited in various media articles is that India's government is worried about inflation, ahead of the upcoming elections. 

However, the problem with this view is that India faces far less inflation pressure than other regions. For example, in June 2023, India’s annual consumer inflation was at 4.8%, down significantly from the start of the year, when inflation was at 6,5% in January 2023. Food inflation has moderated at roughly the same pace, measured at 4,5% in June 2023, down from 5,9% in January. 

Understandably, many people are worried about this development because India is a significant producer of rice globally. The country accounts for a 26% share in the expected 2023/24 global rice production of 525 million tonnes, according to data from the International Grains Council (IGC). 

About 18% of global rice exports


Of the 50 million tonnes of rice for global exports projected for the 2023/24 season, India is expected to account for about 40%. But the affected non-basmati white and broken rice accounts for 18% of global rice exports, still a significant share, and thus raises worries about a potential upside on prices.

Other notable rice exporters are Pakistan, Thailand, the US, Vietnam, China, Cambodia and Myanmar. But India is the largest exporter of all these countries. 
India is South Africa’s second-largest rice supplier, boasting an average annual share of 21% over the past five years.

At the end of June 2023, global rice prices softened from the surge we saw in May, as global production prospects improved. This price decline was positive for an already declining global agricultural commodities basket from the peak levels we saw after Russia invaded Ukraine in March 2022. 

Changing the global view


But the export ban, combined with the non-renewal of the Black Sea Grain Deal, will likely change this constructive view of global food prices.

Read more in Daily Maverick: Russia’s decision to end Black Sea grain deal puts global food security at risk

Also worth noting is that the ban on India’s rice exports comes in a season of abundance, where such policy action is unexpected. For example, the IGC forecasts 2023/24 global rice production at a new peak of 525 million tonnes, up by 2% year on year. 

China, Indonesia, Bangladesh, the Philippines, Brazil, the US and Vietnam are the primary drivers of the expected sizable global rice crop. India remains a notable producer, although its 2023/24 harvest could fall marginally by 0,4% from the 2022/23 season. 

Subsequently, global rice stocks are expected to remain solid at 171 million tonnes, roughly unchanged from the previous 2022/23 season. Such production figures should signal a broadly sideways move in global rice prices without trade frictions. 

In this relatively healthy global supply environment, one would expect a low likelihood of inward-looking policy actions such as export bans. 

Local implications


South Africa is one of the importing countries – the world’s eleventh largest rice importer – with a typical import volume of about a million tonnes per calendar year. The IGC forecasts South Africa’s rice imports at 1,1 million in 2023, and a similar volume for the next year. 

Roughly 90% of the imported rice is for the domestic market, and the balance is typically exported to neighbouring countries. Thailand is the leading rice supplier to South Africa, accounting, on average, for 74% of South Africa’s rice import volumes a year, in the past five years. 

India is South Africa’s second-largest rice supplier, boasting an average annual share of 21% over the past five years. Other rice suppliers to South Africa include Pakistan, Vietnam, China, Australia, the US and Brazil. 

Given the importance of India in the global rice trade, over time, we will likely all feel the impact of the ban, depending on its duration, through an upswing in global rice prices. This would disrupt the declining trend of global food prices we have all been observing through the FAO’s Global Food Price Index. 

The non-renewal of the Black Sea Grain Deal is also an unhelpful development in combating global food security challenges. Over time, such price changes could be apparent in our domestic environment, although the level of price changes is currently unclear. DM

Wandile Sihlobo, Chief Economist at the Agricultural Business Chamber of SA (Agbiz) and Senior Lecturer at Stellenbosch University’s Department of Agricultural Economics, is the author of Finding Common Ground: Land, Equity, and Agriculture.

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