India officially announced a ban on rice exports this week. But it does not cover all rice categories, as some analysts, myself included, initially feared. It is mainly on the 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 in 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).
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, which is still a significant share, and thus raises worries about 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.
At the end of June 2023, global rice prices softened from the surge we saw in May as the 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.
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.
Also worth noting is that the ban on India’s rice exports also 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 sizeable 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, the 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.
Implications for South Africa
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 a 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 volume a year in the past five years.
India is the second largest rice supplier to South Africa, 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 the 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.
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