India, top rice exporter, bans most shipments as late monsoon hits crop

NEW DELHI, Jul 20 (Reuters) – India has banned the export of non-basmati white rice with immediate effect, the world’s top rice exporter said on Thursday, in a move that an export group said could have an impact comparable to Ukraine’s war over wheat supplies.

The government said it was imposing the ban after retail rice prices rose 3% in a month as late monsoon rains damaged crops. while a late monsoon caused a significant lack of rain until mid-June, heavy rain since have caused significant damage.

India accounts for more than 40% of world rice exports, but low inventories mean any reduction in shipments will boost food prices buoyed by Russia’s invasion of Ukraine last year and erratic weather.

“In order to ensure adequate availability of non-basmati white rice in the Indian market and to mitigate price increases in the domestic market, the Indian government has changed the export policy,” the government said in a statement, saying retail prices rose 11.5 percent in 12 months.

The move demonstrates the sensitivity of Prime Minister Narendra Modi’s government to food inflation ahead of next year’s general election.

His administration has extended a ban on wheat exports after slowing down rice shipments in September 2022. Also covered sugar exports this year due to falling sugarcane yields.

“India would disrupt the world rice market much faster than Ukraine would in the wheat market with the invasion of Russia,” BV Krishna Rao, president of the Rice Exporters Association, told Reuters.

Rice is a staple food for more than 3 billion people, and nearly 90 percent of water-intensive crops are grown in Asia, where the El Niño weather pattern typically brings less rainfall. Global prices are already hovering around their highest level in 11 years.

“Sudden export ban would be very painful for buyers, who cannot replace shipments from any other country,” Rao said.

While Thailand and Vietnam do not have enough inventories to cover the shortfall, African buyers would bear the brunt of India’s decision, Rao said, adding that many countries will urge New Delhi to resume shipments.

WEATHER DAMAGE

Heavy rains in northern India over the past few weeks have damaged newly planted crops in states including Punjab and Haryana, with many farmers having to replant.

Rice fields in northern states have been submerged for more than a week, destroying newly planted seedlings and forcing farmers to wait for the waters to recede before they can plant again.

In other major rice-producing states, including West Bengal, Bihar, Chhattisgarh, Andhra Pradesh and Telangana, farmers have set up rice nurseries but have been unable to transplant seedlings due to poor rainfall.

The rice-growing area was expected to rise after New Delhi increased its purchase price for rice, but industry officials now estimate a marginal decline. So far, farmers have planted paddy rice in an area 6% smaller than in 2022.

This week, prices for rice exported from Vietnam, the world’s third-biggest exporter after India and Thailand, spiked to their highest level in more than a decade on rising supply concerns due to El Niño.

Vietnam’s 5% broken rice was offered at $515-$525 per metric ton, the highest since 2011. India’s 5% broken parboiled variety was hovering near a five-year high at $421-$428 per metric ton.

Buyers may move to Thailand and Vietnam, but their 5% broken rice could cost $600 a metric ton, a European trader said.

China and the Philippines, which usually buy Vietnamese and Thai rice, will be forced to pay substantially higher prices, another European trader said.

Additional reporting by Michael Hogan in Hamburg; Edited by Jan Harvey, David Evans and Conor Humphries

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