Rice could become the next challenge to global food supplies as India, the world’s largest rice exporter, is suffering from a severe lack of rain, causing the largest shrinkage of cultivated area in the past three years.
The threat to India’s rice production comes at a time when countries are grappling with rising food costs and rampant inflation. The top exporter’s total rice acreage has fallen by 13% this season due to lack of rain in some areas such as West Bengal and Uttar Pradesh, which account for a quarter of India’s production.
Traders are concerned that falling rice production will complicate India’s fight against inflation and impose restrictions on exports.
Such a move would have far-reaching implications for the billions of people who depend on this staple food. In particular, India accounts for 40% of the global rice trade, now the government has restricted wheat and sugar exports to protect food security, as well as control prices in the domestic market.
Workers clean rice at a wholesale market on the outskirts of New Delhi.(Photo: Bloomberg)
The sharp increase in Indian rice prices reflected concerns about output. Mukesh Jain, director of rice shipping company Sponge Enterprises, said prices of some varieties of rice varieties have increased by more than 10% in the past two weeks in major growing states such as West Bengal, Odisha and Chhattisgarh due to lack of rain and increased demand from Bangladesh. He forecast that export prices could rise to $400/ton in September from $365 at present.
Most of the world’s rice is grown and consumed in Asia, making it important for political and economic stability in the region.
In contrast to the escalation of wheat and corn prices after the outbreak of the conflict in Ukraine, rice prices fell on the back of ample production and stockpiles, helping to avert a larger food crisis.
Much of the world’s rice production depends on the rice crop in India and the operation of the monsoon. Some agricultural scientists are optimistic that there is still time to grow crops and make up for the shortfall. Rainfall is forecast to be steady in August and September which could improve rice production in India.
However, the farmer seems less optimistic. Mr. Rajesh Kumar Singh, 54, said he only grows rice on half of his 2.8 hectares of land in Uttar Pradesh because of drought in June and July. “The situation is really precarious,” he said.
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Professor Himanshu at Jawaharlal Nehru University, said rice prices are under great pressure because it is rare for sowing to happen after mid-July, and so hopes for a recovery in rice production are unlikely. He added that falling output is one of the risks leading to inflation.
Rice shortage could become a new challenge for India’s fight against inflation. Consumer prices have remained above the Reserve Bank of India’s tolerance limit of 6% this year, prompting a sharp hike in interest rates.
Deutsche Bank economist Kaushik Das said: “The fall in sown acreage amid increased import demand from Bangladesh and other Middle Eastern countries has pushed up prices of rice of various grades up to 30% since June. “. “This poses challenges to the potential for food inflation.”
India is supplying rice to more than 100 countries, of which Bangladesh, China, Nepal and several Middle Eastern countries are their biggest customers. For the world at large, there are some bright spots when it comes to food security.
The US is poised to export a bumper wheat crop in the coming weeks, while Ukraine has shipped its first grain shipment since late February this year. According to Mr. Siraj Hussain, former Agriculture Minister of India, when rice production in some states may decrease, the government should reconsider the policy of allocating rice for ethanol production.
India seeks to boost ethanol production using excess sugar and rice as part of efforts to cut fuel costs. Rising food prices following the conflict in Ukraine have increased the risk of hunger and fueled a debate about the importance of food and fuel.
Dr. Hussain said: “At this point, it is difficult to accurately estimate the extent of the loss in rice production. But at current prices, there is hardly a reason to continue allocating rice to produce ethanol”.