Global rice prices hit a 15-year high, India's export ban caused trouble?
The latest data released by the Food and Agriculture Organization of the United Nations (FAO) showed that food price indices other than rice and sugar fell, and the international food price index fell in August.
However, the FAO Rice Price Index rose 9.8 percent month-on-month in August, a 15-year nominal high, reflecting the impact on trade following India, the world's leading rice exporter, imposed a rice export ban in July.
FAO also said that uncertainty about the timing of export bans and concerns about export restrictions have led supply chain parties to cling to inventories and start renegotiating contracts or stop quotations, resulting in current trade mostly in small batches or previously concluded sales.
The first financial reporter learned that within the WTO, all parties have had many discussions on India's implementation of the rice export ban. At the same time, the WTO is currently negotiating long-term agriculture and hopes to achieve results at the 13th Ministerial Conference (MC13) in 2024.
Global rice prices hit a 15-year high
The FAO Food Price Index measures the monthly change in international prices of a basket of food commodities. In August 2023, the FAO Food Price Index averaged 121.4 points, down 2.1 percent month-on-month and down 24 percent from its all-time high in March 2022.
Among them, the FAO vegetable oil price index fell by 3.1% month-on-month in August, partially offsetting the 12.1% increase in July. World sunflower oil prices fell nearly 8% month-on-month on a decline in global import demand and ample supplies from major exporters. In addition, improved soybean crop conditions in the United States drove soybean oil world quotations down, while international palm oil prices fell slightly due to the seasonal increase in production in major Southeast Asian producing countries.
The FAO Cereal Price Index fell 0.7 percent in August from the previous month. International wheat prices fell by 3.8 percent, reflecting an increase in seasonal supplies from major exporting countries. International prices of coarse grains also fell 3.4 percent this month, as a record harvest in Brazil and the imminent start of the U.S. harvest combined to ensure adequate global supplies.
In stark contrast, the FAO Rice Price Index rose 9.8 percent month-on-month in August, a nominal high in 15 years.
This reflects the impact on trade after India, the world's leading rice exporter, imposed a ban on rice exports in July, FAO said.
India is the world's largest rice exporter, exporting 22.2 million tons of rice last year, accounting for about 40% of the world's total rice exports, more than Thailand, Vietnam and other major rice exporters combined.
In late August, India announced a 20 percent export tariff on parboiled rice, which it said would last until mid-October.
FAO also released its latest Cereal Supply and Demand Brief, in which the latest forecast for world rice stocks is 198.1 million tonnes, an all-time high, driven mainly by Indian stocks.
As in previous seasons, nearly three-quarters of rice stocks are expected to be held by India and China, FAO said. Total rice stocks, excluding China and India, are expected to shrink for the second consecutive year, hitting a four-year low of 51.4 million mt.
While there is still uncertainty about the timing and scope of the bans, the recovery in world rice trade in 2024 is expected to be limited if the bans remain in place and the production impact El Niño could have on other Asian exporters, FAO said.
In addition, the FAO Sugar Price Index also increased by 1.3% month-on-month in August and 34.1% higher than the previous year. FAO said the rise in world sugar prices was mainly due to heightened concerns about the impact of El Niño on global production prospects, followed by below-average rainfall in August and persistent dry weather conditions in Thailand. However, the large number of crops currently being harvested in Brazil, as well as lower ethanol prices and the depreciation of the Brazilian real, have combined to ease the upward pressure on world sugar prices.
India export ban
The rice banned from export in India this time is parboiled rice, which is rice products produced after cleaning, soaking, cooking, drying and other hydrothermal treatments after cleaning, soaking, cooking, drying and other hydrothermal treatments, which have the characteristics of high nutritional value, long storage period and short cooking time.
In the international market, parboiled rice is usually sold at a price 5%-10% higher than white rice of the same specification. India is one of the important exporters of parboiled rice, exporting about 7.4 million mt of parboiled rice in 2022, accounting for about one-third of India's total rice exports last year. Currently, Indian parboiled rice is quoted at about $500 per tonne, or about $600 per ton after a 20 percent tariff.
This follows a round of export restrictions imposed by India in July. The Indian government announced on July 20 that it would ban the export of rice other than parboiled rice and basmati rice to ensure supply in the domestic market. At that time, data released by India's food department showed that the retail price of rice in the New Delhi region of India had risen by about 15% by mid-July.
Recently, some of India's export restrictions have been repeatedly criticized in the WTO. According to the first financial reporter, at a WTO agricultural negotiation meeting in mid-July, the United States proposed that the current temporary solution of the existing public reserve for food security (PSH), which allows a member to use trade-distorting subsidies without restrictions, has accounted for more than 40% of global exports (referring to India's rice exports).
The U.S. side said the U.S. is committed to finding solutions to food security, but stressed the need for a meaningful and inclusive approach.
Currently, the WTO negotiations on agriculture aim to find a permanent solution to the interim solution to the Public Reserve (PSH) for food security. It is hoped that the problems faced by some developing countries in purchasing food at prices determined by Governments for the purpose of food security are resolved.
However, some developing countries argue that existing WTO rules do not adequately address market failures and problems such as food hoarding and market speculation, which pushed up food prices and inflation during crises. Due to the lack of a good response to this problem at the WTO level, some grain-exporting countries have begun to adopt unilateral trade restrictive measures.
At the WTO level, all parties have been advancing agricultural trade negotiations, that is, negotiating the extent of agricultural subsidies and export restrictions that exist between the parties.
Recently, WTO Director-General Iweala urged trade ministers to seize the opportunity of the upcoming Senior Trade Officials' Meeting in October to make a political breakthrough and lay the groundwork for agricultural outcomes at MC13, to be held from February 26 to 29, 2024.