Slow sowing, wary global buyers can take rice prices on the same path as wheat
- The price of
Indian ricehas increased by a tenth in India and abroad.
- Bangladesh reduced its import duty and tariff to 25% and allowed the import of non-basmati rice.
- This prompted more Indian traders to export rice out of India in order to clock in more income.
AdvertisementAfter wheat prices mixed up the thalinomics of Indians due the heatwave, we might be looking at another staple affected this season – rice.
Thanks to delayed monsoons in North India, the Kharif crop of rice might be the next victim of climate change.
“While it is also still early, the season has begun slowly. The area sown area is lagging prior year trends across all key segments, with deficiencies especially high in rice, coarse cereals and oil seeds. The area sown through 17 June was reported at c.10.0mn hectares, compared with c.10.8mn hectares for the same period last year,” said a report by Barclays.
The research firm expects sowing activity to pick up in the coming weeks as rainfall spreads. But speculation is already driving up the prices of rice within and outside India. The price of Indian rice increased by a tenth, after Bangladesh lowered its import duties.
Bangladesh’s recent policy changes are driven by the same fears that made the Indian government curb wheat exports a few weeks back. The country reduced its import duty and tariff to 25%, from the previous 62.5%, on June 22. It also allowed the import of non-basmati rice till October 31.
The neighboring country — which is already undergoing staples shortage due to the Russian-Ukraine war and India’s ban on wheat export — fears that India may end up banning the export of rice as well.
Notably, global rice commodity prices have also been increasing since January this year. This incident became the perfect example of globalized inflation that the Indian central bank governor warned about in the last policy announcement.
“Accounting for the recent surge in cyclical food prices, a normal monsoon and elevated international commodity prices, we recently raised our CPI forecasts. We now expect CPI inflation to average 6.5% in FY22-23, which is still lower than the RBI’s 6.7% estimate,” according to the Barclays report.
What happened to wheat can happen with rice too
The government of India had banned wheat exports in May 2022 due to food security concerns, even though it emerged as the key supplier of wheat in the aftermath of Russia-Ukraine war. The heatwave also reduced India’s wheat output projection for FY2023 to 106.4 million metric tonnes from the previous 111.4 million metric tonne projections.
AdvertisementThe imposition of the ban also reduced the price of wheat by at least 5% in the first 10 days, compared to the record high it reached at the start of May before the ban.
The country allowed the export of around 750,000 metric tonnes in two tranches over the past month. As per media reports India may allow wheat exports to five nations Bangladesh, United Arab Emirates, Indonesia, Yemen, and Oman in the near term.
Indonesia is one of the largest wheat importers in the world, while Bangladesh and UAE usually purchase significant volumes of wheat from India. So when India banned wheat export, these countries were bound to face a negative impact of that decision.
Bangladesh with its recent policy changes is just trying to prepare for the worst.
Indian rice exports are rising too
AdvertisementBangladesh’s revised import policy has prompted more Indian traders to export rice out of India in order to clock in more income, leading to a 10% jump in rice prices in the last five days.
“In the last five days, prices of Indian non-basmati rice have risen to $360 per tonne from $350 per tonne in the global markets. This has happened after the news from Bangladesh came in,” BV Krishna Rao, president of the Rice Exporters Association, said.
Suraj Agarwal, CEO of rice-manufacturing company Tirupati Agro Trade, Bangladesh usually buys rice from West Bengal, Uttar Pradesh and Bihar, where the rice prices have shot up 20% for common varieties of rice. The price rise in these states have increased the price of rice to 10% in other states as well.
Notably, India has a market share of 40% in the global rice trade. The country exported non-basmati rice worth $6.11 billion in 2022 and $4.8 billion in FY2021, according to the data shared by Directorate General of Commercial Intelligence and Statistics. In terms of weight, India exports 21.2 million tonnes in FY22 from 17.8 million tonnes in the previous year.
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