The recent ban of rice by India, a central global rice trade, could lead to an upswing in global rice prices, depending on the duration of the ban, the Agricultural Business Chamber(Agbiz) said on Friday.
The ban on India’s rice exports was announced on Friday with a focus on non-basmati white and broken rice. This affected category typically accounts for 45% of the 22 million tons of rice that India exported to the global market annually.
Agbiz earlier last week said India’s government was reportedly worried about inflation ahead of the upcoming elections.
“However, the problem with this view is that India faces far less inflation pressure than other regions. For example, in June 2023, India’s annual consumer inflation was at 4.8%, down significantly from the start of the year when inflation was at 6.5% in January 2023. Food inflation has moderated at roughly the same pace, measured at 4.5% in June 2023, down from 5.9% in January,” Agbiz said.
The agricultural organisation’s chief economist, Wandile Sihlobo, said this would disrupt the declining trend of the global food prices that have been observed through the FAO’s Global Food Price Index.
“The non-renewal of the Black Sea Grain Deal is also an unhelpful development in combating global food security challenges. Over time, such price changes could be apparent in our domestic environment, although the level of price changes is currently unclear,” Sihlobo said.
South Africa is one of the importing countries, the world’s eleventh largest rice importer, with a typical import volume of about a million tonnes a calendar year.
The International Grains Council (IGC) forecast South Africa’s rice imports at 1.1 million this year and a similar volume for the next year. Roughly 90% of the imported rice was said to be for the domestic market and the balance was typically exported to neighbouring countries.
Thailand is the leading rice supplier to South Africa, accounting on average for 74% of South Africa’s rice import volume a year in the past five years.
India is the second largest rice supplier to South Africa, boasting an average annual share of 21% over the past five years. Other rice suppliers to South Africa include Pakistan, Vietnam, China, Australia, the US and Brazil.
Agbiz said understandably, many people were worried about this development because India was a significant producer of rice globally.
The country accounts for a 26% share in the expected 2023/24 global rice production of 525 million tons, according to data from the IGC.
Sihlobo said at the end of June this year, global rice prices softened from the surge seen in May as the global production prospects improved. This price decline was positive for an already declining global agricultural commodities basket from the peak levels seen after Russia invaded Ukraine in March last year.
“But the export ban, combined with the non-renewal of the Black Sea Grain Deal, will likely change this constructive view of global food prices.”
He stressed that it was also worth noting that the ban on India’s rice exports also came in a season of abundance where such policy action was unexpected.
For example, the IGC forecast 2023/24 global rice production at a new peak of 525 million tons, up by 2% year-on-year. China, Indonesia, Bangladesh, the Philippines, Brazil, the US, and Vietnam are the primary drivers of the expected sizeable global rice crop. India remained a notable producer, although its 2023/24 harvest could fall marginally by 0.4% from the 2022/23 season.
Subsequently, the global rice stocks were expected to remain solid at 171 million tonnes, roughly unchanged from the previous 2022/23 season. Such production figures would signal a broadly sideways move in global rice prices without trade frictions.
Agbiz said in this relatively healthy global supply environment, one would expect a low likelihood of inward-looking policy actions such as export bans.
Recently, FNB Commercial senior agricultural economist Paul Makube said domestically, any upswing in global prices would impact local prices due to the open economy with over 60% exposure to the international market.
“For other agricultural commodities, SA enjoys abundance with bumper summer crops and horticulture crops. The 2022/23 maize harvest estimate is sitting comfortable at 16.4 million (+6% y/y) with good carry-over stock of 2.8 million tons for the 2023/24 marketing season,” Makube said.
BUSINESS REPORT