World rice market fears domino effect from India's ban

A female farmer spreads paddy out to dry at a rice mill on the outskirts of Kolkata, India in January 2019.

India’s latest ban is similar to restrictions it imposed in 2007 and 2008, but the impact on global supply and prices could be more profound, analysts say. India now accounts for more than 40% of global rice trade, compared with 22% 15 years ago, putting pressure on other rice-exporting countries.

“India is much more important to the rice trade now than it was in 2007 and 2008. At that time, India’s ban forced other exporters to implement similar restrictions, like a domino effect. Now, other countries also have little choice but to react to the market,” said a New Delhi-based rice producer who declined to be named.

The impact on prices of the world’s most consumed food crop was swift, reaching a 15-year high after India imposed a ban on the sale of regular rice, excluding basmati. New Delhi had previously restricted supplies of lower-quality broken rice in 2022.

Analysts say limited supplies risk raising rice prices and global food inflation, hitting poor consumers in Asia and Africa.

“Thailand, Vietnam and other exporting countries are ready to step up their exports to close the gap with India as the global rice market is facing a supply shortage. However, there is a constraint on expanding export capacity. This constraint could lead to a price increase reminiscent of the remarkable price increase the world witnessed in 2007-08,” said Nitin Gupta, senior vice president of Olam Agri India, one of the world’s leading rice exporters.

In 2008, rice prices hit a record high of over $1,000 a tonne after India, Vietnam, Bangladesh, Egypt, Brazil and other small producers collectively restricted exports.

The constraint facing rival rice exporters to India is that they cannot increase exports beyond 3 million tonnes per year while also meeting domestic demand amid a limited surplus.

Both Thailand and Vietnam have stressed that they will ensure domestic consumers are not harmed by increased exports. “It is unacceptable for a rice exporting country to face limited supply and high domestic prices,” Vietnam’s Minister of Industry and Trade Nguyen Hong Dien said in a statement last week.

Pakistan, recovering from devastating floods last year, could export 4.5 million to 5 million tonnes instead of the current 3.6 million tonnes a year, according to an official from the Rice Exporters Association of Pakistan (REAP). However, the country is unlikely to be able to export indefinitely amid double-digit inflation.

Global rice prices have already risen about 20% following India’s ban. Traders at international rice trading firms say a further 15% increase in prices could see some countries impose an export ban.

“The question is not whether they will restrict exports, but how much they will restrict and when they will implement those measures,” said a New Delhi-based trader.

Rice prices in Thailand and Vietnam jumped to 15-year highs this week as buyers rushed to buy grain to compensate for a drop in Indian exports.

Rice is the staple food of more than 3 billion people and nearly 90% of the crop is produced in Asia. The onset of the El Nino drought has threatened crops in major rice-producing countries this summer.

According to Tin Tuc Newspaper