Nomura said rice production in India fell 5.6 percent year-on-year due to below-average monsoon rainfall, which has affected the harvest.
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India, the world’s largest rice exporter, has banned the shipment of broken rice – a move that will resonate across Asia, according to Nomura.
In an effort to control domestic prices, the government banned broken rice exports and levied a 20 percent export tax on certain types of rice starting September 9.
Nomura said the impact on Asia would be uneven, and the Philippines and Indonesia would be most vulnerable to the ban.
India accounts for about 40% of global rice exports, exporting to more than 150 countries.
Exports reached 21.5 million tons in 2021. That is more than the total number of shipments from the next four largest grain exporters – Thailand, Vietnam, Pakistan and the United States, Reuters reported.
But yields have fallen 5.6% year-on-year since September 2, due to below-average monsoon rainfall, which affected the harvest, Nomura said.
For India, July and August are the “most important” months for rainfall, as they determine how much rice is sown, said Sonal Varma, chief economist at the financial services firm. This year, the irregular monsoon rains during those months have reduced production, she added.
Major rice producing states of India such as West Bengal, Bihar and Varma said Uttar Pradesh is receiving between 30% and 40% less rainfall. Although rainfall gradually increased at the end of August, “sowing is further delayed [of rice] That is, the greater the risk, the lower the return. ”
Earlier this year, the South Asian country limited wheat and sugar exports to control rising domestic prices as the Russo-Ukrainian war plunged the global food market into turmoil.
Most affected
The government of India recently announced that rice production during the southwest monsoon season from June to October could decrease by 10 to 12 million tons, which implies that the crop yield could be reduced by up to 7.7 million tons. % over the same period last year, Nomura said.
“The impact of India’s rice export ban will be felt directly by countries importing from India and indirectly by all rice importers, because of its impact on global rice prices. “, according to a recently published Nomura report.
Results from Nomura show that rice prices remain high this year, with retail price increase in July reaching around 9.3% from 6.6% in 2022. Pepper price inflation consumption (CPI) for rice also skyrocketed. 3.6% year-on-year through July, up from 0.5% in 2022.
The Philippines, which imports more than 20% of its rice needs, is the country in Asia most at risk of price hikes, Nomura said.
As the largest net importer of goods in Asia, rice and rice products account for 25% of the market share in the country’s CPI food basket, the highest proportion in the region, according to the report. Statista.
Domestic inflation at 6.3% in August, data from Philippine Statistical Office shows – above the central bank’s target range of 2% to 4%. Therefore, India’s export ban will be a blow to the Southeast Asian country.
Similarly, India’s rice export ban will also be detrimental to Indonesia. Indonesia may be the second hardest hit country in Asia.
Nomura reports that the country is import-dependent with 2.1% of its rice demand. According to Statista, rice accounts for about 15% of the CPI food basket.
However, for some other Asian countries, the pain may be minimal.
Singapore imports all of its rice, with 28.07 percent of it coming from India by 2021, according to Trade Map. But the country is not as vulnerable as the Philippines and Indonesia because of the “ratio of rice in [country’s] The CPI basket is pretty small,” Varma noted.
Consumers in Singapore tend to spend “a large portion” of their costs on services, which is often the case in higher-income countries, she said. On the other hand, low- and middle-income countries “tend to spend a larger proportion of costs on food.”
“Vulnerability needs to be viewed from the perspective of how it affects consumer spending and dependent countries. [are] on imported food items,” she added.
Countries will benefit
On the other hand, some countries could benefit.
Mr. Nomura said, Thailand and Vietnam will be more likely to profit from India’s ban. That’s because they are the second and third largest rice exporters in the world, making them the most likely alternative for countries looking to fill the gap.
Vietnam’s total rice production will reach about 44 million tons in 2021, with exports bringing in $3.133 billion, according to a report published in July by research firm Global Information found.
Data from Statista shows that Thailand will produce 21.4 million tons of rice in 2021, up 2.18 million tons from the previous year.
With an increase in exports and India’s ban putting pressure on rice prices, the overall value of rice exports will increase and these two countries will benefit from that.
“Anyone currently importing from India will be looking to import more from Thailand and Vietnam,” Varma said.
