India, the world’s biggest rice shipper, slapped a ban on exports of broken rice and curbed shipments of some varieties, threatening to rattle global crop markets further and exacerbate food inflation.
The South Asian country prohibited exports of broken rice and imposed a 20% levy on shipments of unmilled and husked brown varieties, according to statements from the government late Thursday. Semi-milled and wholly-milled rice, except parboiled and basmati varieties, will also have a similar duty.
The moves by India, which accounts for 40% of the global rice trade, will put further pressure on countries that are struggling with worsening hunger and soaring food inflation. Rice is a staple food for about half of the world’s population, with Asia producing and consuming about 90% of global supply.
Rice is now the third major agricultural commodity in India to face restrictions on overseas sales this year. The nation has already curbed wheat and sugar exports, adding to a spate of food protectionism that’s exacerbated chaos in global food markets brought on by the war in Ukraine.
In contrast to the surge in wheat and corn prices after Russia’s invasion of Ukraine, rice has been subdued due to ample production and stockpiles, helping to ward off a bigger food crisis. But with India’s latest move, there is no guarantee it will remain so.
The variety that now attracts the export tax accounts for about 60% of India’s non-basmati rice shipments, according to B.V. Krishna Rao, president of the Rice Exporters Association. The restriction will benefit suppliers from other major growers such as Thailand, Vietnam and Pakistan, he said.
“The government’s move will boost global rice prices,” said Rao. Export prices of white rice may cross $400 a ton from as much as $350 at present on a free-on-board basis, he said. Indian exporters will ask the government to waive taxes on about 2 million tons of rice that have already been contracted for exports, but not yet shipped, Rao said.
Broken rice is mainly used for animal feed or to produce ethanol in India. Prices have jumped this year on increased export demand. Top buyers include China, which uses it mostly for livestock feed, and some African countries, which import the grain for food. It accounts for almost 20% of India’s shipments abroad.
India’s rice planting has shrunk 5.6% this season due to a lack of rainfall in some areas. Monsoon showers have been more than 25% lower than average in major growing states of Uttar Pradesh, Jharkhand and Bihar. Overall, the country has received 5% above normal precipitation during the period.
The trade restrictions will create supply concerns given that India is the single largest rice exporter, said Bloomberg Intelligence analyst Alvin Tai. “Definitely won’t help global food inflation but depends how long they keep it up.”