According to India Ratings and Research (Ind-Ra), the recent government notification that prohibits the export of non-basmati white rice is anticipated to enhance the operational performance and bolster the credit profile of India’s leading basmati rice exporters.
On July 20, India implemented a ban on the export of non-basmati white rice in an effort to regulate the escalating prices of this essential food commodity in the domestic market. Industry experts point out that the delayed monsoon arrival and inadequate rainfall until mid-June have caused significant worries regarding paddy output in the country.
Read More: India prohibits non-basmati white rice exports amidst supply concerns
India holds the title of being the largest rice exporter globally, commanding approximately 40% of the total market share. Following closely behind are Thailand with a 13% share and Vietnam with a 9% share, among other contenders.
During the financial year 2023, India successfully exported 14.24 million tonnes of non-basmati rice.
The export ban captured international attention, making headlines in several developed nations and leading to panic buying in various countries such as the US, Canada, and Australia.
Read More: India’s rice export ban triggers panic buying among NRIs in the US
Ind-Ra reports that countries importing basmati rice are expressing worries about a potential ban on this category. Consequently, they are requesting early shipments, leading to the possibility of higher prices in the short and medium term. The report also highlights that numerous farmers have shifted their focus to producing basmati rice to capitalize on the notable price disparity in export markets.
Since FY21, the leading four basmati rice exporters have witnessed a remarkable increase in demand and profits. The ban on non-basmati rice might prompt importing countries to switch to the basmati category, albeit on a limited scale, driven by the substantial price difference and lower production and supply of non-basmati rice. This shift could potentially lead to higher inflation in the importing nations.
Over the past decade, India’s rice production has displayed a compound annual growth rate (CAGR) of 2.6%, whereas consumption has grown at a rate of 1.3%. The decision to prohibit non-basmati rice exports is likely influenced by the repercussions of adverse climatic changes on food grain production over the years, as well as the recent surge in prices in the domestic market.
According to the most recent report from Ind-Ra, major Indian rice exporters are predominantly focused on dealing with basmati rice. The rising demand and favorable pricing in this category have had a positive impact on their operational performance during FY23.
“Revenues for the four major basmati exporting companies have grown at a median rate of 28% year-on-year. The export ban on non-basmati rice may further benefit these companies by improving liquidity due to early shipments requested by importing countries, fearing a ban on basmati rice. Additionally, the elevated price of basmati in export markets and the shift in demand from non-basmati to basmati rice could lead to increased volumes, revenues and profitability in the medium term for basmati rice exporters,” says the Ind-Ra report.
Non-basmati rice constitutes 80% of India’s rice exports, and the ban on its export is anticipated to bring substantial implications to the consumption patterns in rice-importing nations. Both basmati and non-basmati rice prices have been on the rise since FY22 due to major global suppliers like Thailand and China reducing their exports post-pandemic to prioritize domestic food security.
“The realisation of basmati rice price jumped to 84 a kg in FY23 from 64 a kg in FY21 and reached 91 a kg during April-May 2023,” the report adds.
