Impact on Philippines, Indonesia, Thailand: Nomura

India’s rice production fell 5.6 percent year-on-year in September due to below-average monsoon rains, which hurt the harvest, Nomura said.

Rebecca Conway | Getty Images News | Getty Images

India, the world’s largest rice exporter, has banned shipments of broken rice, a move that will reverberate across Asia, according to Nomura.

In an attempt to control domestic prices, the government banned exports of broken rice and imposed a 20% export tax on several varieties of rice from 9 September.

Nomura said the impact in Asia will be uneven, with the Philippines and Indonesia most vulnerable to the ban.

India accounts for approximately 40% of global rice shipments and exports to more than 150 countries.

Exports reached 21.5 million tonnes in 2021. That’s more than the total shipment of the four biggest grain exporters: Thailand, Vietnam, Pakistan and the United States, Reuters reported.

But output has declined 5.6 percent year-on-year since Sept. 2 in light of below-average monsoon rains, which hurt the harvest, Nomura said.

For India, July and August are the “most crucial” months for rainfall as they determine how much rice is planted, said Sonal Varma, chief economist at the financial services firm. This year, uneven monsoon rain patterns during these months have reduced production, he added.

Major rice producing states of India such as West Bengal, Bihar and Uttar Pradesh is receiving 30% to 40% less rainfall, Varma said. Although the rains increased towards the end of August, “the more I delayed sowing [of rice] that is, the greater the risk of underperformance.”

Earlier this year, the South Asian nation curbed exports of wheat and sugar to control rising local prices as the war between Russia and Ukraine wreaked havoc on global food markets.

The most affected

India’s government recently announced that rice production during the southwest monsoon season between June and October could fall by 10 to 12 million tonnes, implying that crop yields could fall by to 7.7% year-on-year, Nomura said.

“The impact of a ban on rice exports by India would be seen both directly by countries that import from India and also indirectly by all rice importers, due to its impact on the world rice prices,” according to a recently released Nomura report.

Nomura’s findings revealed that the cost of rice has remained high this year, with prices in retail markets rising around 9.3% year-on-year in July, compared with 6.6% in 2022. Consumer Price Inflation (CPI) for rice also increased. 3.6% year-on-year in July, up from 0.5% in 2022.

The Philippines, which imports more than 20 percent of its rice consumption needs, is the country in Asia most at risk of rising prices, Nomura said.

As Asia’s largest net importer of the commodity, rice and rice products account for 25% of the country’s food CPI basket, the highest share in the region, according to Statista.

Inflation in the country was 6.3 percent in August, data from the Philippine Statistics Authority showed, above the central bank’s target range of 2 percent to 4 percent. In light of this, India’s export ban would be an additional blow to the Southeast Asian nation.

India's rice production is likely to fall this year, the asset management firm says

Similarly, India’s rice export ban will also be harmful to Indonesia. Indonesia is likely to be the second most affected country in Asia.

Nomura reported that the country depends on imports for 2.1% of its rice consumption needs. And rice accounts for about 15% of its food CPI basket, according to Statista.

For some other Asian countries, however, the pain is likely to be minimal.

Singapore imports all of its rice, with 28.07% coming from India in 2021, according to Trade Map. But the country is not as vulnerable as the Philippines and Indonesia as “the ratio of rice to [country’s] The CPI basket is quite small,” Varma noted.

Consumers in Singapore tend to spend “a larger share” of their spending on services, which typically appears to be the case in higher-income countries, he said. Low- and middle-income countries, on the other hand, “tend to spend an even greater proportion of their expenditures on food.”

“Vulnerability should be seen both from the perspective of the impact on consumer spending and from the perspective of countries’ dependence [are] on imported food,” he added.

Countries that will benefit

On the other hand, some countries could be beneficiaries.

Thailand and Vietnam will most likely benefit from India’s ban, Nomura said. This is because they are the world’s second and third largest rice exporters, making them the most likely alternatives for countries looking to fill the gap.

Vietnam’s total rice production was about 44 million tons in 2021, with exports generating $3.133 billion, according to a report released in July by research firm Global Information.

Statista data showed that Thailand produced 21.4 million tons of rice in 2021, an increase of 2.18 million tons from the previous year.

With increased exports and India’s ban putting upward pressure on rice prices, the overall value of rice exports will increase and both of these countries will benefit.

“Anyone who is currently importing from India will look to import more from Thailand and Vietnam,” Varma said.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *