On Thursday (8th), local time, India, the world's largest rice exporter, announced that it would impose a 20% tariff on some grades of rice exports to ensure domestic food supply.
According to the Financial Associated Press, after the Indian government imposed tariffs on rice exports, the loading of rice at Indian ports quickly stopped. Nearly 1 million tonnes of rice are currently stranded in Indian ports. Rice buyers are reluctant to pay a 20 percent tariff on the agreed contract price.
According to CCTV Finance reported on the 9th, this summer's extreme high temperature weather and insufficient rainfall have led to a contraction in the rice planting area in India and other countries, which is likely to cause the harvest to fall short of expectations.
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India imposes a 20% tariff on some of its rice exports
According to CCTV News, India's Ministry of Finance issued an announcement on September 8 that from September 9, a 20% export tax will be levied on rice other than steamed grain rice and Indian fragrant rice, involving unmilled rice, hulled brown rice, semi-polished rice and whole polished rice, and the export of broken rice will be prohibited.
Indian food department officials said on September 9 that the downward trend in India's rice production has led to the Indian government's restrictions on food exports, which may trigger higher food prices in some countries.
Image source: Visual China
Officials in India's food sector say the country's food production cuts are largely due to drought in four states, which have affected 2.5 million hectares and reduced food production by about 7 million to 8 million tonnes. It is expected that by winter, the area under rice cultivation may be further reduced by 3.8 million hectares, and the rice area may be reduced by 10 million to 12 million tons.
For India, this year, india's major rice-producing areas such as West Bengal, Bihar and Uttar Pradesh received below average rainfall, due to insufficient rainfall in some areas, resulting in a 5.6% reduction in sown areas, coupled with high temperatures leading to lower production efficiency, there are forecasts that India's rice production will be reduced by at least 8% this year, raising concerns about rice production.
It is worth mentioning that India, the world's second largest wheat producer, abruptly announced a ban on wheat exports in mid-May this year. The country, the world's second-largest sugar producer, also restricts sugar exports, imposing total export restrictions on sugar (including raw sugar, refined sugar and white sugar) from June 1, and the total export volume of the 2021-2022 crushing season (October 2021 to September 2022) will be limited to 10 million tons.
India accounts for more than 40% of global rice exports
According to 21st Century Business Herald, India is the world's second largest rice producer and the first large rice exporter, and the country's rice export volume accounts for nearly 40% of the rice trade. In the 2020/21 and 2021/22 fiscal years, India's rice export revenues amounted to US$8.8 billion and US$9.6 billion, respectively. In addition, india's rice exports in the first quarter of the fiscal year rose 12 percent from the same period last year to $2.6 billion, according to India's Ministry of Commerce.
In terms of global rice supply and demand patterns, the USDA lowered its 2022/23 global rice production forecast by 2.3 million tonnes to 512.4 million tonnes on August 16, second only to the record of the same period last year; Lowered the 2022/23 global ending stocks forecast by 4.2 million tonnes to 178.5 million tonnes, down more than 3% from the same period a year earlier and for the third consecutive year of decline. At the same time, the global rice trade volume in 2023 was slightly raised to 54.7 million tons, unchanged from the record of the same period last year.
According to the World Magazine, the 2017 International Comparison Project Results Report released by the World Bank pointed out that 72% of the Indian population cannot afford a healthy diet, and 43% of the population does not have access to a nutritious diet.
Inflation further exacerbates this situation.
In India's domestic market, the average flour price rose to 32.38 rupees (about 2.78 yuan) per kilogram in April, the highest price since 2010. The price of edible oil has increased by 20%-50%.
The 2020 Vision Report of the National Council for Transformation and Development of India said, "While India has been successful in addressing short-lived food insecurity caused by droughts or floods, it has failed to make much effort in chronic food insecurity, which is reflected in low energy intake and high rates of malnutrition." About half of India's population is chronically malnourished, especially vulnerable groups such as children, women and the elderly with weak spending capacity. ”
Or push up global rice prices
The USDA reported in August that global rice supply is expected to decline by 4.1 million tonnes to 697.3 million tonnes in 2022-23, mainly due to lower production in Bangladesh and India.
For global crop trade markets, India's imposition of tariffs on rice exports in these categories could mean an escalation of global "food protectionism."
India has been the largest exporter of rice for quite some time in the past. Any restrictions on rice exports in India have the potential to raise global rice prices, triggering a supply crisis at a time of soaring food prices and making food inflation worse. Billions of people around the world who eat rice as a staple food will be affected.
The chart above shows the historical trend of CBOT brown rice futures prices, which have soared to a large extent since the second half of 2019. Alarmingly, the spiral out of control of rice prices between 2008 and 2009 was due to the food crisis caused by increased energy costs, panic buying over export restrictions and adverse weather conditions.
Su Bowen, chief economist of Japan's Nomura Holding Company: I think the price of food will continue to rise, which is more challenging for low-income emerging economies, because food spending accounts for the largest proportion of household consumption in these places.
India's announcement of tariffs on rice followed a ban on the export of products such as wheat and sugar earlier this year. Market analysts fear that the continued soaring prices of multiple food categories will eventually lead to a supply crisis, and countries around the world, especially low-income countries, will face worse food shortages.
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Edited | Cheng Peng du Hengfeng
Proofreading | Wang Yuelong
Cover image source: Visual China
The daily economic news is synthesized from CCTV Finance, Finance Associated Press, Global Magazine, and 21st Century Business Herald
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