The Potential Global Food Crisis Triggered by India’s Rice Export Ban

In a move to stabilize soaring domestic prices, India enacted a prohibition on the export of non-basmati white rice on July 20th. This decision swiftly led to a surge in panic buying and bare rice shelves across Indian grocery stores in the United States and Canada, consequently driving up prices.

The realm of rice encompasses an extensive array of varieties, yet its global trade mainly revolves around four key categories. The primary contributor to global trade is the slender, long-grain Indica rice, with fragrant basmati rice, short-grain Japonica (known for sushi and risottos), and glutinous or sticky rice for confections constituting the remainder.

As the foremost rice exporter globally, India commands approximately 40% of the cereal’s global trade. (Other significant exporters include Thailand, Vietnam, Pakistan, and the US.)

China, the Philippines, and Nigeria stand as prominent rice buyers, while “swing buyers” like Indonesia and Bangladesh bolster their imports during times of domestic scarcity. Notably, rice consumption is burgeoning in Africa, and in nations such as Cuba and Panama, rice serves as a primary energy source.

During the previous year, India shipped 22 million tonnes of rice to 140 countries, with around six million tonnes comprising the relatively more affordable Indica white rice. (Global rice trade estimates hovered around 56 million tonnes.)

The cessation of Indica white rice exports from India, which dominates approximately 70% of global trade, has ignited concerns about an uncontrollable surge in worldwide rice prices. Pierre-Olivier Gourinchas, Chief Economist at the IMF, anticipates that this export ban could lead to price hikes of up to 15% across global grain markets this year.

Moreover, the timing of India’s export ban is inauspicious, as pointed out by Shirley Mustafa, a rice market analyst at the UN’s Food and Agriculture Organization (FAO). Two significant factors contribute to this unfavorable timing.

Firstly, global rice prices have been on a steady ascent since early 2022, rising by 14% since last June.

Secondly, supplies are under duress, as the arrival of the new rice crop in markets is still nearly three months away. South Asia’s inclement weather, characterized by erratic monsoon rains in India and floods in Pakistan, has disrupted supply chains. Rising fertilizer prices have also escalated the costs associated with rice cultivation.

Furthermore, currency devaluation has amplified import expenses for numerous nations, while substantial inflation has elevated trade-related borrowing costs.