India has implemented a ban on the export of non-basmati white rice in an effort to control domestic inflation. This move has sparked concerns about rising global food prices, especially in the wake of Russia’s termination of a significant grain deal, which caused wheat and corn prices to climb. The ban, which was introduced due to heavy rains damaging domestic crops, follows a previous attempt to curb foreign demand with a 20% duty on international exports introduced in September. However, this measure did not effectively address the soaring foreign demand caused by extreme climate conditions impacting production in various countries.
India is the leading exporter of rice globally, accounting for over 40% of global shipments. While the ban does not apply to higher-grade basmati rice, which is India’s most well-known variety, non-basmati white rice makes up approximately 25% of exports.
International sales of Indian rice have surged by 35% in the year leading up to June, resulting in a 3% increase in domestic prices within just the past month. According to India’s Ministry of Consumer Affairs, Food and Public Distribution, the cost of rice in India has risen by 11.5% compared to last year. The ban, introduced on Thursday evening, is intended to ensure that non-basmati white rice remains sufficiently available in the Indian market and leads to a decline in prices for domestic consumers.
The rising food inflation has placed pressure on the BJP government in Delhi as national elections approach next year, as well as state-level elections in the coming months.
India’s decision has caused rice prices from several Asian countries to climb in the global markets, and traders anticipate further price increases in the near future. The price of India’s 5% broken parboiled rice had been nearing a five-year peak throughout the week, ranging between $421 and $428 per metric tonne, and currently, it stands at around $424.50.
Thailand and Vietnam, the second and third-largest rice exporters respectively, have also experienced price hikes in their 5% broken rice recently. Even before India’s announcement, Vietnam’s rice had already reached its highest level since 2011 and has continued to rise, while Thailand’s variety has reached levels unseen in over two years.
Global food supplies have been affected by Russia’s conflict in Ukraine, which has driven up commodity and grain prices worldwide. Russia’s decision to withdraw from the UN-brokered Black Sea grain initiative, which ensured safe passage for vessels transporting cereals, has raised concerns about a potential global food crisis.
Prior to Russia’s move, grain prices had fallen by more than a third, while wheat prices had decreased 14% since January and corn prices had experienced a 20% decline.
To mitigate the impact, the US has pledged an additional $250 million to establish and expand alternative routes for Ukrainian grain exports. However, Russia’s defense ministry has essentially declared that any ship departing a Ukrainian port will be considered a legitimate military target, causing fears of further disruptions to supplies.
The interruption of Ukrainian grain exports coincides with the occurrence of unusually hot weather and insufficient rainfall in important growing regions of the US. As a result, forecasts for the US wheat harvest have been reduced, and stocks are estimated to reach a 16-year low.
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