India bans rice exports, UAE follows suit: Possible impact on world food prices

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India recently imposed a ban on lower-grade rice exports including exports of de-oiled rice bran until November 30. In a statement, the country’s Ministry of Consumer Affairs said that it has amended the export policy “in order to ensure adequate availability of non-basmati white rice in the Indian market and to allay the rise in prices in the domestic market.” It said the ban would take effect immediately.

The United Arab Emirates soon announced its own ban on rice exports and re-exports for four months, including rice of Indian origin.

These announcements come weeks after Russia pulled out of the Black Sea Grain Initiative which had allowed Ukrainian wheat, sunflower, and corn to be shipped despite the ongoing conflict. Almost 33 million tonnes of grain were shipped from Ukraine under the deal, and world food prices declined by roughly 20 per cent as a result, according to the UN’s Food and Agriculture Organization.

The Indian ban on rice and its effect on the world food market is compounded by the drought conditions being faced by Thailand, the world’s second-largest rice exporter. Thailand predicts that it might face drought conditions by early 2024 and has hence advised its rice farmers to produce only a single crop of rice, thus reducing the rice expected to come into the market next year.

Implications of India’s rice ban

Since India’s ban took effect on July 20, the world food market has been in turmoil, raising fears of global food inflation. Rice prices in Asia jumped to the highest level in more than three years after India’s notification. India is the world’s largest exporter of rice and accounts for 40 per cent of the world’s rice shipments (estimated global trade in rice was 56 million tonnes).

Last year, India exported 22 million tonnes of rice to 140 countries of which six million tonnes was the relatively cheaper Indica white rice, reports BBC.

Rice exports account for 11 per cent of total global grain production, compared to 16 per cent for maize, 27 per cent for wheat, and 42 per cent for soybeans, according to International Food Policy Research Institute (IFPRI). However, a ban affecting 40 per cent of global rice exports would put pressure on other suppliers and on rice inventories concludes IFPRI.

Thailand has already been impacted by the strengthening El Niño conditions in the Indian Ocean with rainfall across the nation expected to be as much as 10-20 per cent below average this monsoon season. The prevailing weather and market conditions are certain to fuel inflation in Southeast Asian nations such as Malaysia and Singapore. Singapore is reportedly in talks with the Indian government for a separate deal to ensure rice supply.

The markets highly exposed to India’s export restrictions are concentrated in Sub-Saharan Africa and in the Middle East and North Africa region, said BMI, a Fitch Solutions research unit. The firm cited Djibouti, Liberia, Qatar, the Gambia, and Kuwait as being the “most exposed”, reported CNBC.

UAE’s ban on rice export

The UAE Ministry of Economy’s ban covers rice of all varieties including brown rice, fully or partially milled rice, and broken rice. The UAE, which imports up to 85 per cent of its food, imports rice primarily from India, Pakistan, Vietnam, and Thailand.

With two of its main supply markets facing reduced production, the UAE has chosen to restrict exports and re-exports for a period of four months. The main destination of rice re-exports from the UAE are Oman, Benin, Zimbabwe, and Somalia. Companies wishing to export or re-export rice must submit a request to the Ministry of Economy to obtain an export permit outside the country, state news agency WAM reported. This permit will be valid for up to 30 days.

News of the ban has led to food traders in the UAE looking for alternate sources of producer markets in order to compensate for the non-basmati rice varieties, reported the leading regional daily Gulf News. The report added that Dubai-based Adil Group predicts short-term price volatility as traders and food importers look to shore up reserves.

The news of the ban led to supermarkets temporarily restricting the quantities sold to retail customers, as per reports by leading dailies. However, bigger supermarket chains such as Lulu Group and Carrefour said they currently hold rice stocks of more than six months.

The rice futures market had a bull run until June this year but took a downturn later in the month, reported commodities tracker Investing.com. News of supply restrictions from India, Thailand, and UAE has impacted retail prices with retailers projecting a sizeable increase in the price of rice in the local market.

However, with UAE moving swiftly to protect the local market, and India’s monsoon season still underway, the rice market could see an upswing in the last quarter of this year.