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India’s trade restrictions drive rice export prices to 15-year high

01 October 20234 min reading

India, the world’s leading rice exporter, has created significant disruptions in the global rice market with its trade actions. In July, India imposed a ban on the export of milled white rice, followed by an export tax on parboiled rice and the introduction of a minimum export price for basmati in August. As a consequence, global rice importers have swiftly turned to the next largest rice suppliers, namely Thailand and Vietnam. This shift in demand has resulted in a substantial surge in export prices, reaching levels not seen since 2008.

While India’s reason for the restrictions was primarily fear of a rice shortage in the country due to rising food prices, high inflation, and the El Nino weather pattern that reduced yields, the consequences reverberated globally, leading to price increases. 

Since the implementation of the bans, global rice prices have increased by 15-25%. The hardest hit has been Asian countries dependent on Indian white rice, such as Bangladesh and Nepal, and African countries such as Benin, Senegal, Togo and Mali, where rice is a staple food.

The absence of India’s white rice from the global market is far more significant now than it was 15 years ago. In 2008, prices spiked after India (then the second-largest exporter) placed a ban on non-basmati-milled rice exports. After removing the ban in 2011, India expanded shipments and became the largest exporter the following year, a position it has since maintained. In 2022, India exported slightly more than the next four exporters combined, accounting for approximately 40 percent of global trade. India has consistently been the lowest-priced white rice supplier since 2020, particularly to Sub-Saharan Africa. The sharply higher rice prices are expected to particularly impact this import-dependent region.

Before the Indian ban, global prices had already been rising due to strong importer demand and lower production in several exporting countries. Indonesia has been a minor importer these past few years but is set to more than double its imports in 2023 as the government has authorized 2 million tons of imports. Thailand and Vietnam are the primary suppliers to that market, so their exports were already in high demand. Exportable supplies from Thailand and Vietnam are limited, with stocks forecast at the lowest level in several years. Neighboring Pakistan and Burma had lower production in 2022/23.

FEAR OF THE DOMINO EFFECT

The consequences of India’s restrictions are far-reaching, affecting billions of people who depend on rice as a staple food. Videos of panicked rice purchases at grocery stores in the US and Canada have gone viral, highlighting the impact of India’s actions on global markets. Experts warn that New Delhi’s measures could lead other rice-exporting countries to take similar steps, raising concerns about food availability and inflation. Countries such as Thailand, Vietnam and Pakistan, which account for 30 percent of the global rice trade, could impose similar restrictions if their crops fall victim to El Niño-related disruptions. Myanmar, the fifth largest rice exporter, is also considering export restrictions, while Thailand has advised farmers to reduce rice cultivation to save water.

Despite the strong increase in export quotes, prices have not hit 2008 records for a few reasons. In 2008, India banned exports of both white rice and parboiled rice; it currently permits parboiled rice exports, albeit with a 20 percent tax. India has made some small government-to-government exceptions to the white rice ban thus far. In 2008, the third-largest exporter Vietnam also temporarily banned new sales, a major reason for the further elevation in Thai prices; this year, Vietnam has continued exporting. In 2008, the top importer the Philippines continuously bought larger volumes as prices escalated; this year, it is delaying purchases, awaiting lower prices. In the past week, prices started to decline from their peaks. 

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