In August, global rice prices surged to their highest point in 15 years following India’s decision to restrict certain rice exports, as reported by the Food and Agriculture Organization on Friday, September 8th.
Despite a general decline in global food prices during August, the cost of rice increased by 9.8 percent compared to the preceding month. This rise is attributed to trade disruptions caused by India’s ban on exports of Indica white rice, as reported by the FAO in their monthly update.
“Uncertainty about the ban’s duration and concerns over export restrictions caused supply-chain actors to hold on to stocks, re-negotiate contracts or stop making price offers, thereby limiting most trade to small volumes and previously concluded sales,” the UN agency said.
Rice stands as a crucial global food staple, and its prices have experienced significant increases on the international market due to the repercussions of the Covid-19 pandemic, the conflict in Ukraine, and the effects of the El Niño weather phenomenon on production levels.
In July, India implemented a ban on the export of non-basmati white rice, which constitutes approximately 25% of its total rice exports.
Read More: India prohibits non-basmati white rice exports amidst supply concerns
At that time, the Ministry of Consumer Affairs and Food stated that this action was taken to “guarantee sufficient availability” and “mitigate the increase in domestic market prices.”
India accounts for more than 40 percent of all global rice shipments, making it a major player in the international rice trade.
In a July note, data analytics firm Gro Intelligence cautioned that the ban was anticipated to have adverse effects on African nations, Turkey, Syria, and Pakistan, all of which were already grappling with elevated inflation rates.
On Thursday, the Philippines, one of the world’s leading rice importers, finalized a five-year agreement with Vietnam to purchase rice.
According to the FAO, global rice stocks are projected to reach a record-breaking 198.1 million tonnes, with India and China collectively holding almost three-quarters of this quantity, mirroring trends from previous seasons.
This figure accounts for approximately 38 percent of the anticipated rice consumption during the same period.
However, the combined rice reserves held by the rest of the world are predicted to decline for the second consecutive year by the end of the year, according to the report.
El Niño might also exert a detrimental impact on upcoming harvests.
The disruption in the rice market coincides with a gradual decline in global food prices since reaching their peak last year, following the conflict between major grain-producing countries, Russia and Ukraine.
In August, the FAO’s global food price index, monitoring monthly fluctuations in the prices of a variety of food commodities, averaged 121.4 points, indicating a 2.1 percent decrease from July.
The index was 24 percent lower than its peak reached in March 2022.
In August, the prices of cereals, meat, dairy products, and vegetable oils all experienced declines.
Sugar prices, on the other hand, increased by 1.3 percent due to heightened concerns regarding the potential impact of the El Niño phenomenon on sugarcane crops, coupled with below-average rainfall in August and ongoing dry weather conditions in Thailand.
Global food prices had slightly rebounded in July when Russia pulled out of a deal brokered by the UN and Turkey that had enabled Ukraine to ship grains via the Black Sea.
The FAO said on Friday it had lowered its forecast for world trade in cereals in 2023 and 2024 to 466 million tonnes — a 1.7 percent drop from the previous marketing season.
“Traded volumes of wheat and maize are all predicted to decline, due to a mix of reasons, including falling exports by Ukraine due to trade disruptions associated with the ongoing war,” it said.
“FAO has also lowered its forecast for world trade in rice from the July figure considering the stepped-up export restrictions by India,” the FAO added.
An expected recovery of the rice trade in 2024 would be “modest” if the India restrictions are protracted and El Nino disrupts production in other Asian exporters, the FAO added.