Bloomberg reports that the government of India is discussing a plan to prohibit the export of non-basmati rice amid higher rice prices in the domestic market.  The ban also aims to avoid inflation on the threshold of important elections in the country. 

Different levels of rainfall in rice-growing areas in India caused the rice price to surge by 20 percent within 10 days. 

The ban, if imposed, would affect 80 percent of rice exports of the country. It would help reduce the rice price in India, but would push up rice prices internationally, because India is the biggest rice exporter, accounting for 40 percent of total global rice output.

In September 2022, India prohibited the export of broken rice (HS 1006 4000) and at the same time taxed 20 percent on some types of rice exports, including unhusked rice (HS 100610), unpolished rice, and other types of rice, except parboiled rice and Basmati rice. The move immediately affected rice prices all over the globe. Vietnam’s rice prices rose daily.

According to the World Meteorological Organization, El Nino has developed in tropical Asia Pacific for the first time in seven years, threatening to cause drought in many rice growing regions in Asia. India's rice export ban, if implemented, may further strain global supply.

Many countries have increased purchases of rice, not only for daily consumption, but also for storage for fear that El Nino will cause rice shortages. The US Department of Agriculture predicts that the rice inventories globally fell by 8.9 million tons to 173.5 million tons in the 2022-2023 period, and the figure will be 170.2 million tons in the 2023-2024 period. 

This means that the world would lack 10 million tons of rice, and the situation may become worse next year.

Rice is the major food of half of the world's population, 90 percent of which is consumed by Asians. The 5 percent standard broken rice in Asia has soared to a 2-year high price.

On July 13, Vietnam’s 5 percent broken rice was traded at $513 per ton, while rice of the same kind in Thailand was at $517 per ton, and India rice $493.

Vietnam’s rice export price at 10-year peak

The director of an enterprise that has exported rice for 30 years confirmed that the rice price has soared due to lowered supply. Countries have rushed to buy rice to store for fear of drought.

In 2022, India prohibited the export of rice to ensure domestic food security, pushing world prices up, including Vietnam’s export prices.

According to the director, in addition to the Philippines, which buys 2.5-3.1 million tons of Vietnam’s rice each year, Vietnam’s exporters have recently received orders from China and Indonesia as well. 

Some countries in South Africa have resumed buying Vietnam’s rice. All these factors have caused Vietnam’s rice prices to bounce back.

Analysts predict that Vietnam’s rice may set a new record in export price by the end of 2023 or early 2024. 

However, the price increases will still depend on large exporters such as India and Thailand. Vietnam’s companies need to consider the market thoroughly before signing contracts in order to obtain best prices.

Export companies have been asked to ensure certain stocks before signing contracts, or they would face the risk of signing contracts at low prices, but have to collect rice from farmers at high prices and take a loss.

According to the General Department of Customs (GDC), in the first half of 2023, Vietnam exported 4.24 million tons of rice, earning $2.26 billion, up 21.3 percent in quantity and 32.2 percent in value year on year.

The average export price in the first half of 2023 was estimated at $539 per ton, up 10.2 percent year on year, the highest in the past 10 years.

Vietnam’s rice exports grew at two- or three-digit rates. New markets such as Indonesia, Chile, Turkey and Senegal saw sharp growth rates of 1,147-15,972 percent.

Nguyen Nhu Cuong from the Ministry of Agriculture and Rural Development (MARD) said that if India imposes the ban, the global rice prices would escalate.

In 2008, rice price rocketed to $1,000 per ton after inventories dropped to the 30-year record low while global demands increased sharply.

Tam An