India is the largest rice exporter in the world, accounting for 40% of the global rice trade. The majority of Kharif crops are planted in the monsoon season (June and July) and harvested in the months of October and November. Given that India exports rice to more than 150 nations, any decrease in its exports would put additional upward pressure on food prices, which are already on the rise as a result of the drought, extreme heat, and Russia's invasion of Ukraine. This year, the Indian government has restricted the export sales of three major agricultural products, including rice.
Impacts Of India’s Policy
India imposed a 20% duty on white and brown rice exports under the restraining order. The affected rice accounts for roughly 60% of total rice exports from India. India has also prohibited the export of broken rice, but parboiled rice and basmati rice export are exempt from the ban. Given that Beijing is the country's largest consumer of broken rice, the supply chain for the food grain in China appears to be worsened by India's immediate ban on its export. Many countries around the world are currently suffering from a worsening food crisis or inflation, and this move by India, according to reports, will put additional pressure on these countries.
Due to plentiful supplies, rice has been a food that has helped people weather a bigger food crisis in sharp contrast to the spike in wheat and corn prices following Russia's invasion of Ukraine. However, with India's most recent action, that might change.
India’s Broken Rice Exports
India is a major supplier of broken rice to some African countries. According to a China Agricultural Information Network article, China is the largest buyer of Indian broken rice, importing 1.1 million tons from India in 2021. India's total rice exports in 2021 exceeded the combined rice exports of the world's top four producers, Thailand, Vietnam, Pakistan, and the United States, totaling a record 21.5 million tons. According to the report broken rice is primarily used in China as animal feed, as well as in the production of noodles and wine.
Reasons For India’s Policy Changes
According to the Ministry of Consumer Affairs, Food, and Public Distribution, the geopolitical environment has increased demand for broken rice on a global scale and affected commodity prices, including that of animal feed. Following India's hottest months in more than a century in March and April, the government restricted wheat and sugar exports in May.
The Ministry of Agriculture reported that rice acreage in India's major growing states, such as Uttar Pradesh, West Bengal, and Bihar, was reduced from one year to the next due to insufficient rainfall in June and erratic rainfall in July and August. The previous 26.7 million hectares were reduced by 13% to more than 23.1 million hectares.
In the fiscal year that ended in March, India exported approximately 3.8 million tons of broken rice globally, accounting for roughly one-fifth of its total non-basmati rice exports. From April to June, exports of the low-cost commodity totaled 1.4 million tons, accounting for roughly one-third of non-basmati rice exports. The new duty is likely to deter buyers from purchasing from India and direct them to rivals Thailand and Vietnam, which have been struggling to increase shipments and raise prices. The export ban is significant because it appears that less paddy has been sown overall this Kharif season than last year. The future prospects for crops, as well as prices, may be impacted by this.
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