Rice – India imposes export restrictions on some varieties – AgFax

India, the largest exporter of rice, introduced a policy to limit its exports on September 9. The government has imposed a ban on exports of 100 percent broken rice (HS 100640) and a 20 percent tariff on paddy (100610), brown (100620) and white rice that is neither basmati nor parboiled rice (10063090) .

This is the first restriction India has imposed on its exports since the lifting of a three-year ban on non-basmati rice in 2011. Since then, India has become the main exporter of rice, expanding its dominance so that in 2021 India accounted for 41 percent of total global exports, more than the next 4 exporters (Thailand, Vietnam, Pakistan, and the United States) combined.

India supplies more than half of the world’s broken rice exports, which is discussed in more detail on page 10. As a result of this ban, the forecast for total rice exports has been reduced to 20.3 million tonnes in 2022 and 20.0 million tonnes in 2023.

Indian exports of paddy rice, brown rice, non-basmati rice, uncooked regular white rice (HS 10063090) are now taxed at 20 percent. The largest of these categories is white non-basmati rice, uncooked, which it supplies mainly to Africa and neighboring countries. Especially in the last couple of years, Indian prices have been at a significant discount compared to other major exporters, making it an attractive option for low-income importing countries.

As shown in the chart below, the 20 percent export tariff applied to the September 9 export quota results in a higher price for most Asian exporters except Thailand. The export duty was imposed in less than a day, sending exporters into a frenzy.

India exports various types of rice, and this ban specifically excludes basmati rice and parboiled rice. Basmati rice is a type of fragrant rice that enjoys a premium and is mainly exported to the Middle East, Europe and North America. India’s basmati rice exports average around 4.3 million tonnes annually. India is the major exporter with Pakistan as the main competitor.

Parboiled rice is made by steaming regular paddy rice under pressure and then grinding it, resulting in distinct culinary characteristics in parts of India, Bangladesh, parts of Africa, and Saudi Arabia. Since paddy rice can be processed into both regular white rice and parboiled rice, the new policy may encourage more supply of parboiled rice as it will not be taxed.

However, over the past few years, India has captured an increasing share of global cooked exports, shipping 4.1 million tonnes in the first 7 months of 2022, compared to Thailand’s 0.7 million tonnes in the same period.

Neighboring countries may be particularly affected by this action. Bangladesh has high domestic prices and recently reduced its import tariff to 5 percent to make imports more affordable. Historically, India has been its main supplier. Fortunately, it has already sought to diversify its imports in the past couple of months, securing deals with Vietnam and Burma.

Bangladesh imports both regular white rice and parboiled rice, so this may change the type of rice it buys from India. Nepal has also become a major importer of rice, almost entirely dependent on India due to its landlocked geography. It imported polished white rice and paddy rice, both of which would be taxed under the new measure. Sri Lanka is another country that has had lower production, high prices and increased imports, buying both parboiled and regular white rice from India.

India’s ban on the export of broken rice will disrupt the world market

In 2022, the rice trade is estimated to decline, partly due to India’s new policy to ban exports of broken rice. In 2021, world trade in broken rice increased by 53 percent and reached 6.7 million tons. So far, in the first half of 2022, exports of broken rice totaled 4.8 million tons, an increase of 39 percent compared to the same period in 2021. India’s new policy will eliminate this trade, which accounted for more than half of the world’s broken rice trade.

By 2021, milled rice accounted for approximately 10 percent of total rice exports. In the first half of 2022, disrupted exports amounted to almost 20 percent. The rise in demand came in a year of record high exports for India, with cheap rice and abundant supply. India’s biggest markets were China, Senegal and Vietnam.

Senegal has historically been the largest destination for Indian broken rice and continues to be a key market, but has fallen from the top spot. Senegal uses broken rice for one of its main dishes. However, since 2021, China and Vietnam have purchased significant volumes of broken rice. China (the world’s largest producer) is still the largest importer of rice and has switched to buying smaller rice for animal feed.

More surprisingly, Vietnam (the third largest exporter) has become a major importer, buying broken rice from India because of the significant price difference. Indian milled rice is more competitively priced compared to domestic rice from China and Vietnam, as well as some forage grains. Rice is mainly used for animal feed, as well as in the production of alcoholic beverages and for processed food products.

On September 9, 2022, India banned the export of 100 percent milled rice, which will have a significant impact next year. India’s major broken rice importers such as China, Vietnam and Senegal are expected to import less in 2023 due to the recent ban. While India’s exports are expected to fall, Pakistan, Vietnam, Thailand and Burma have the potential to offset India’s decline.

Rice exports from Thailand have become the largest in the last 3 years

Thai rice exports continue to recover in 2022 and are forecast to reach 7.5 million tonnes, the highest since 2019. During the first 7 months of this year, exports increased by almost 60 percent compared to the same period last year. Key factors include increased market share in Iraq, higher exports of aromatics, additional supplies of broken rice and additional capacity as India recently imposed export restrictions.

Iraq has historically purchased rice from Western hemisphere and Asian suppliers, but India has been the dominant supplier in recent years. However, Thailand has started to make inroads in 2021 and has more than 75 percent market share in the first 7 months of 2022. Thailand supplies white rice at prices below $400 per ton on average, increasing its market share over more expensive Indian rice varieties. This year, Thailand delivered the largest export to Iraq since 2013.

Thai fragrant rice exports increased by 40 percent year-on-year to nearly 1.0 million tons. Specialty varieties, such as Thai jasmine, have gained popularity in the United States, Canada, the European Union, and parts of Asia.

In general, the prices of aromatic polished rice decreased by 10 percent. That pushed U.S. jasmine rice imports to a record high, up nearly 50 percent from last year. Jasmine rice now accounts for more than half of U.S. imports, which are forecast to be at a record high.

Another key driver of Thailand’s export growth has been the resumption of broken rice exports. Demand from China was very high, so exports of Thai broken rice there increased. With India’s ban on broken rice exports, Thai small rice has more opportunities.

Also, India’s export tax on non-boiled basmati rice could further open opportunities for Thailand to supply more milled rice. Thai rice exports are expected to maintain a strong pace until the end of 2022 and are forecast to rise to 8.0 million tons in 2023.

Full report.