In the international rice arena, much of the attention has been focused on the Indian Government’s July 2023 decision to ban non-basmati white rice exports. This is significant to the global rice market as India is the world’s largest rice exporter. The USDA reports India’s 2022-2023 marketing year share of total global rice exports at 40%, as shown in Figure 1 (USDA ERS, FAS, 2023). India has dominated the international market for some time due to low domestic prices and high stocks – resulting from a bevy of trade-distorting subsidies – which allows India to offer rice at substantially lower prices to international buyers. Almost half of India’s exports are non-basmati parboiled rice, with the ban affecting approximately 15% of global rice trade.
The decision by India to ban rice exports was a means of countering rising food inflation and ensuring sufficient domestic supplies heading into an election year. Also factoring into the government’s decision were uncertain weather conditions attributed to El Niño (warming conditions and potential drought). Indian rice stocks remain plentiful, due in part to their much-scrutinized subsidization policy for rice. The non-basmati rice ban has not been the only policy action on rice taken by India over the last year. In September 2022, India banned exports of broken kernel rice and placed 20% tariffs on rough rice, brown rice, and regular milled white rice. In August 2023, a 20% tariff was placed on parboiled rice exports through mid-October and a $1,200 per ton minimum export price was placed on basmati rice.
The Indian government has insulated Indian rice farmers from falling domestic rice prices. It sets market support prices and subsidizes crop inputs like fuel, fertilizer, and water to support farmer incomes and lower food prices. In April 2023, a consortium of grain exporting countries, including the U.S., filed a second counter notification at the World Trade Organization, formally challenging India for obscuring the true level of price supports and subsidies it provides for its wheat and rice producers (USA Rice, 2023).
While policy decisions by the Indian government have had an impact on global rice prices, the question remains: Will U.S. rice prices see support from this policy-induced market shock? The short answer is ‘not immediately – but opportunity might exist later in the year.’
Global rice prices can support the domestic market to a certain degree as a result of trade flows of both Indian and U.S. rice. Rice exports from India are primarily destined for African countries (e.g., Benin, Senegal, Kenya, Togo, Guinea, and the Ivory Coast). These countries predominantly import broken rice, which is much cheaper than milled rice. In addition, the Philippines, Malaysia, and Vietnam are also reliant on Indian rice exports. Whereas, for the U.S., major rice markets include Mexico, Canada, Haiti, and Latin America. Mexico is primarily a buyer of U.S. rough rice. The Middle East is a region that imports from both the U.S. and India. However, sales to the Middle East – while important – are not ‘core’ markets for U.S. rice.
The USDA FAS reports that Thai, Vietnamese, and Pakistani export rice prices have increased (Figure 2) because of the Indian ban as countries begin to cover their needs, raising concerns that other countries will also restrict or ban exports (notably, Myanmar recently announced that it was temporarily restricting exports). Thai export prices had risen rapidly from late July through mid-August, peaking at about $650 per ton. Currently, Thai prices are quoted at $595 per ton. Like Thailand, Vietnamese export prices rose quickly but have since retreated to $616 per ton. Asian buyers are holding off from making purchases in hopes that prices continue to fall. U.S. rice export prices for No. 2 4% broken long grain milled rice remain quoted at $760 per ton, unchanged since late January and the highest since October 2008. U.S. quotes for Latin American markets were also unchanged since late January at $725 per ton. Indian price quotes have been unavailable since the start of the export ban which came into effect on July 20th. Prior to the ban, India rice was quoted around $450 per ton.
Expectations of a significant increase in U.S. rice supplies has helped keep U.S. rice prices stable. However, the export ban in India ultimately will benefit U.S. rice producers in the short run with stronger U.S. export demand likely developing in the Middle East (e.g., Iraq). U.S. rice may also be able to secure additional exports into the Caribbean and Central and South American markets which will contribute to capturing lost market share. U.S. rough rice sales to other Latin American markets are expected to increase in 2023/24. In the previous marketing year, the U.S. saw significant erosion of its market share in Mexico to South American suppliers, mostly Brazil, due to their more competitive prices. Long term, high global prices will increase global rice production. Growing stockpiles of rice in India – compounded by India’s extensive use of trade-distorting subsidies – will ultimately be dumped on the world market, thus causing world rice prices to over-correct (CoBank, 2023).
Figure 1. Global Rice Exports, by Country Share (%), USDA FAS.
Figure 2. Weekly FOB Export Quotes ($/ton) for Long Grain Milled Rice, USDA FAS.
CoBank. “India’s Rice Export Ban: Short-Term Benefit, Long-Term Challenge for U.S. Rice”. August 17, 2023.
USA Rice Federation. “India’s Rice Subsidies Under Fire at WTO by U.S., Thailand, and Others”. USA Rice Daily, April 6, 2023.
USDA Economic Research Service (ERS). “Rice Outlook”, September 2023. https://www.ers.usda.gov/webdocs/outlooks/107418/rcs-23h.pdf?v=8325.4 Date Accessed: September 14, 2023.
USDA Foreign Agricultural Service (FAS). PSD Online. https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery Date Accessed: September 25, 2023.
Deliberto, Michael. “How Market Dynamics Separate World and U.S. Rice Export Prices.” Southern Ag Today 3(44.1). October 30, 2023. Permalink