India Bans Non-Basmati White Rice Exports to Curb Inflation

Introduction

India has implemented a ban on the export of non-basmati white rice in an effort to control domestic inflation. This move comes just days after Russia terminated a key grain deal, which caused wheat and corn prices to rise. The ban was introduced due to heavy rains that have damaged domestic crops and follows a previous attempt to curb foreign demand with a 20% duty on international exports. India is the world’s largest rice exporter, accounting for over 40% of global shipments. While the ban does not apply to higher-grade basmati rice, non-basmati white rice makes up about 25% of India’s rice exports.

Impact on Global Food Prices

The ban on non-basmati white rice exports from India has raised concerns about further increases in global food prices. International sales of Indian rice have already increased by 35% in the past year, contributing to a 3% rise in domestic prices over the past month. The Indian government hopes that the ban will ensure adequate availability of non-basmati white rice in the Indian market and lead to lower prices for domestic consumers. However, this move has caused the price of rice from several Asian countries to rise on global markets, and traders expect prices to continue rising in the coming days.

Rise in Rice Prices

Before the ban was implemented, the price of India’s 5% broken parboiled variety of rice was already close to a five-year peak. It ranged between $421 and $428 per metric tonne. Currently, it stands at around $424.50. Thailand and Vietnam, the world’s second and third-largest rice exporters respectively, have also experienced increases in the prices of their 5% broken rice. Vietnam’s rice was already trading at its highest level since 2011 before the ban, and Thailand’s rice jumped to levels not seen in over two years.

Global Food Crisis Concerns

Global food supplies have already been impacted by Russia’s actions in Ukraine. The war in Ukraine has driven up commodity and grain prices worldwide. Russia’s decision to pull out of the UN-brokered Black Sea grain initiative, which guaranteed safe passage for vessels carrying cereals, has raised fresh concerns about a global food crisis. Prior to this move, grain prices had fallen by over a third, while wheat prices had declined by 14% since January and corn prices had decreased by 20%. The US has pledged $250 million to create and expand alternative routes for Ukrainian grain exports, but Russia’s defense ministry has threatened to target any ship leaving a Ukrainian port, potentially disrupting supplies further.

Conclusion

India’s ban on non-basmati white rice exports is an attempt to control domestic inflation caused by heavy rains and increased foreign demand. However, this move has raised fears of further increases in global food prices. Rice prices from several Asian countries have already risen, and traders expect prices to continue rising in the coming days. This ban comes on the heels of Russia’s termination of a key grain deal, which has already impacted global food supplies and raised concerns about a global food crisis. The situation in Ukraine and other factors, such as extreme weather conditions, are contributing to the volatility in food prices.