India’s rice export ban could send decade-high prices soaring even higher

indian forbidden non-basmati white rice exports with immediate effect Thursday night, the latest government effort to curb high food prices.

The Ministry of Consumer Affairs said the ban would help ensure “adequate availability” of non-basmati white rice in India, as well as “mitigating the rise in prices in the domestic market”.

india is the world leading exporter of ricewhich represents more than 40% of world trade in rice, as well as the second largest producer after china

Analysts told CNBC this week’s ban could send already high prices soaring further, compounding the effects of September on the country. broken rice shipment ban.

“Global rice (supply) would fall sharply… as the country is the world’s second-biggest producer of staple foods,” said Eve Barre, ASEAN economist at trade credit insurer Coface.

Barre said that Bangladesh and Nepal would bear the brunt of the ban, as both countries are major export destinations.

The ban could also exacerbate food insecurity for countries that rely heavily on rice, agricultural analysis firm Gro Intelligence predicted. in a recent report published before the announcement.

“Top destinations for Indian rice include Bangladesh, China, Benin and Nepal. Other African countries also import a large amount of Indian rice,” Gro Intelligence analysts wrote.

According to the Ministry of Consumption, non-basmati white rice constitutes about 25% of India’s rice exports.

Affected importers may turn to alternative suppliers in the region, such as Thailand and Vietnam, said Radhika Rao, a senior economist at DBS Bank.

“In addition to a reduction in world rice supplies, panic reactions and speculation in world rice markets would exacerbate rising prices,” Coface’s Barre said.

prices are already hovering around the highs of the decadepartly due to tight supplies when the staple became an attractive alternative as prices of other major grains rose following Russia’s February 2022 invasion of Ukraine.

Wheat prices rose this week after Russia withdrew of the Black Sea grain deal. The agreement sought to prevent a global food crisis by allowing Ukraine to continue exporting.

“Rice inflation has already accelerated from a year-on-year average of 6% last year to almost 12% in June 2023,” DBS’s Rao said.

Raw Rice Futures It rose a further 1% to $15.8 per quintal (ctw) after India’s announcement.

The South Asian nation is struggling with high prices for vegetables, fruits and grains. Tomato prices in India have increased more than 300% in recent weeks due to adverse weather. A Reuters poll predicted that the country’s inflation is likely to hit 4.58% year after year due to rising food prices.

Rabobank senior analyst Oscar Tjakra has forecast that world rice prices will rise further due to India’s share of the global market. Tjakra forecast that prices could even break second-quarter highs when paddy rice reaches levels of $18 per cwt.