Rice prices soften in domestic markets after ban; exports may shrink by 25%

India, which commands 40% share in the global rice trade, exported 21.23 mt of rice in 2021-22, against 17.78 mt in the previous year

On a day when food inflation — measured by the wholesale price index — for August continued to remain high despite overall decline, there is some more good news on the cereal front.
 

Trade and market sources said that rice prices across major mandis in the country have softened by around Rs 100-200 per quintal ever since the world’s biggest exporter of the grain late last week banned shipments of broken rice and imposed a 20 per cent duty on exports of various other grades as the country tries to boost supplies and calm prices after below-average monsoon curtailed planting.

However, traders said an exact picture of the impact of government measures on prices is difficult to ascertain right now because paddy arrivals are low at this time of the year ahead of the kharif harvest.

“On the whole, there is decline, but a clear picture is not emerging because paddy arrivals at most mandis are weak,” said a trader.

Internationally, reports and market players said that rice prices have risen since the export ban as the market expects reduced availability in global trade.

India, which commands 40 per cent share in the global rice trade, exported 21.23 million tonnes (mt) of rice in 2021-22, against 17.78 mt in the previous year.

Total domestic rice production in the 2021-22 crop year was around 130 mt, of which around 112 mt was in the kharif season.

In the past few days, Thailand rice sellers had increased their quotes for 5 per cent broken rice, 25 per cent broken rice, and parboiled rice by about $2 per tonne, $1 per tonne, and $2 per tonne, respectively, to around $430-434 per tonne, $417-421 per tonne, and $437-441 per tonne, in the aftermath of the ban.

In Vietnam, rice sellers have increased their prices for 5 per cent broken rice and 25 per cent broken rice by about $10 per tonne each to around $403-407 per tonne and $388-392 per tonne, respectively.

Pakistan’s rice sellers have increased their quotes for 5 per cent broken rice, 25 per cent broken rice, and 100 per cent broken rice by about $35 per tonne, $35 per tonne, and $33 per tonne to around $413-417 per tonne, $395-399 per tonne, and $383-387 per tonne, respectively.

“Globally, all major players have raised their rice prices ever since India imposed a duty on some types of rice, while totally banning export of broken rice as supplies could get further squeezed,” said Rahul Chauhan, commodity analyst at iGrain India.

The Centre last week imposed 20 per cent export duty on some non-Basmati rice types. This was followed up with a total ban on the exports of all forms of broken rice.

Trade and market sources said in total, around 10 mt of rice exported from India (5.9 mt under export duty and 4 mt banned) of the total annual exports of 21.2 mt (as on 2021-22) will now be under restriction.

The ban on broken rice came into effect on September 9, but the notification says that between September 9 and September 15, consignments and shipments where loading has started at ports before the ban and shipping bills is filed of vessels berthed or where broken rice consignments have been handed over to the Customs will be allowed to be exported.

As a consequence of the ban, news agency Reuters on Wednesday reported that India’s rice exports could fall by around a quarter this year as buyers switch to rival suppliers offering the grain at a cheaper price, said trade and industry officials.

“The duty has made Indian rice expensive. Exports will drop by at least 5 mt,” B V Krishna Rao, president, The Rice Exporters Association, told Reuters.

That would leave exports this year at around 16.2 mt.

Rice shipments reached a record 21.2 mt in the 2021-22 — more than the combined shipments of the world’s next four biggest exporters of the grain: Thailand, Vietnam, Pakistan, and the US.

The Centre has imposed the duty only on white rice, which could prompt some buyers to switch to parboiled rice, which is exempt from export duties, said Rao.

Rice exports had jumped to 9.36 mt in the first five months of the current fiscal year that began on April 1, up from 8.36 mt in the same period a year ago, according to government data.