India, the World's 2nd Largest Rice Producer, Moves to Restrict Exports... Concerns Over Worsening Food Crisis

Export Ban on Ssaragi Starting from the 9th
Additional 20% Tax on Brown Rice Exports
Concerns Over Spread of Food Export Restriction Policy

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Ji-eun] Concerns are rising that the global food crisis and inflation will worsen as India, the world's second-largest rice producer, imposes some restrictions on rice exports following wheat and sugar. India is tightening export controls citing domestic food security after a sharp decline in rice production due to abnormal weather conditions.

According to Nihon Keizai on the 14th, the Indian government banned the export of broken rice (small broken grains) from the 9th and decided to impose an additional 20% tax on the export of brown rice and polished rice. Broken rice is used for animal feed or ethanol production and is mainly imported by developing countries such as those in Africa due to its low price.

The reason India has restricted rice exports is that rice production sharply declined due to prolonged drought caused by abnormal weather. According to statistics released by the U.S. Department of Agriculture in August, India's rice production decreased by 0.9% compared to the previous year. As production declined, the price of broken rice, which was 16 rupees (about 280 won) per kilogram as of January, rose to 22 rupees this month. The Indian government plans to reduce export volumes considering the reduced rice cultivation area due to abnormal weather to suppress the rise in domestic food prices.

Countries around the world are concerned that India's rice export restrictions will lead to higher food prices and worsen inflation. India is the world's second-largest rice exporter after China, responsible for more than 40% of global shipments. Last year, India exported a total of 21.5 million tons of rice, which is larger than the combined exports of the world's four major grain exporters, including Thailand and Vietnam. Previously, in 2007, when India restricted rice exports, rice prices soared to $1,000 per ton. Besides rice, India has also restricted wheat and sugar exports citing domestic food security.

Major foreign media reported that rice trade across Asia is experiencing significant disruption due to India's export restrictions. As Indian exporters have consecutively halted new contracts, food traders are seeking to secure supplies from competitors such as Vietnam and Myanmar.

Competitor companies raised the price of broken rice, which accounts for about 5% of the crushed volume, by $20 per ton just four days after India announced the export restrictions. The prices of broken rice from Vietnam and Thailand are $393 and $431 per ton respectively, significantly higher than the Indian price of $338 per ton.

There are also concerns that the trend of restricting food exports could spread to other countries worldwide. Egypt suspended wheat and flour exports for three months starting in March, and 27 countries including Turkey, Serbia, and Kazakhstan have joined in imposing agricultural export restrictions. Bloomberg pointed out, "As the food crisis accelerates due to abnormal weather and the Russia-Ukraine invasion, more countries are adopting protectionist measures," adding, "These actions could exacerbate food shortages and political instability in poor countries, necessitating a global coordinated response."