Rice market shows strain after India’s 6-week campaign of curbs

NEW DELHI – In about six weeks, India has rattled the rice market.

The world’s top shipper has placed

restrictions on all of its exports,

panicking governments from Asia to West Africa. Other big growers have tried to reassure consumers that rice supply is ample, but it has done little to calm the market.

Rice prices in Asia jumped

back near the highest level in almost 15 years on Wednesday after India slapped

more curbs on parboiled and basmati rice

over the previous weekend. They were the last remaining varieties free from export restrictions, bringing to a head a recent campaign of tightening that started with a July 20 ban on the shipment of some grains.   

“Spikes in rice prices always hurt poor consumers the most,” said Professor Emeritus Peter Timmer of Harvard University, who has studied food security for decades. “The most pressing concern right now is whether Thailand and Vietnam follow India and put significant controls on their rice exports. If that happens, we will see world rice prices zoom past US$1,000 (S$1,350).”

The anxiety over supply is understandable. Rice is vital to the diets of billions and contributes as much as 60 per cent of the total calorie intake for people in parts of South-east Asia and Africa. The benchmark price is currently at US$646 a tonne and weather could shake up the market even further.

The onset of El Nino in 2023 threatens to parch many key growing regions across Asia, with

Thailand already warning of drought conditions

in early 2024. The crop in China, the world’s biggest producer and importer, appears to have escaped poor weather so far, but India’s major growing areas need more rain.

India’s measures boil down to politics. The government of Prime Minister Narendra Modi is facing an election in early 2024 and high food prices can make voters very unforgiving at the polls. The curbs have had some impact.

The cost of rice in the capital New Delhi was still higher than a year ago as of Aug 31, but since the export ban in July, prices have held steady at 39 rupees (S$0.64) a kilogramme. Across the nation, they have inched up slightly. However, India’s restrictions are reverberating across other countries.

The Philippines was forced last week to

place a cap on rice prices

across the country due to an “alarming” increase in retail costs and reports of hoarding by traders. The nation is the world’s second-biggest importer of the grain.

Other worried nations are opting for the diplomatic route.

Guinea has sent its trade minister to India, while Singapore, Mauritius and Bhutan have requested that New Delhi exempt them from curbs on the grounds of food security – a provision the South Asian nation added when banning one variety. The restrictions have also provided an opportunity for Thailand.

The world’s second-biggest shipper has been on a roadshow in recent weeks, with its trade officials making trips to the Philippines, Indonesia, Malaysia and Japan. If you want rice, we have it, was the message.

Vietnam is offering some support to the market, saying in August that the nation is likely to exceed its export target for the year, a feat it could achieve without jeopardising its own food security. Volumes to Indonesia have soared over the first seven months of 2023, while shipments to China are also higher, customs data show. However, Myanmar’s ambitions wavered recently.

The nation’s rice federation suggested a temporary halt to shipments to cool rising domestic prices, a proposal that was knocked back by the government. The federation had only recently said it could ship more.

The Thai Rice Exporters Association is expected to update its white rice 5 per cent broken price following its weekly meeting on Wednesday, and investors will be watching the Asian benchmark to see if calm, or concern, is trending. BLOOMBERG