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Impact on Philippines, Indonesia, Thailand: Nomura


Rice production in India has fallen by 5.6% yr on yr as of September in light of below-average monsoon rainfall, which has affected harvest, Nomura said.

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India, the world’s largest rice exporter, has banned shipments of broken rice — a move that can reverberate across Asia, in response to Nomura.

In a bid to regulate domestic prices, the federal government banned exports of broken rice and slapped a 20% export tax on several varieties of rice starting Sept. 9. 

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

India accounts for roughly 40% of world rice shipments, exporting to greater than 150 countries.

Exports reached 21.5 million tons in 2021. That is greater than the full shipment from the following 4 biggest exporters of the grain — Thailand, Vietnam, Pakistan and the US, Reuters reported. 

But production has decreased by 5.6% year-on-year as of Sept 2. in light of below-average monsoon rainfall, which affected harvest, Nomura said.

For India, July and August are the “most important” months for rainfall, as they determine how much rice is sown, said Sonal Varma, chief economist on the financial services firm. This yr, uneven monsoon rain patterns during those months have reduced production, she added.

Big rice-producing India states reminiscent of West Bengal, Bihar and Uttar Pradesh are receiving 30% to 40% less rainfall, Varma said. Although rainfall increased toward the top of August, “the more delayed the sowing [of rice] is, the greater is the chance that yield will likely be lower.” 

Earlier this yr, the South Asian nation curbed wheat and sugar exports to regulate rising local prices because the Russia-Ukraine war sent global food markets into turmoil.

Most affected

The Indian government recently announced that rice production throughout the Southwest monsoon season between June and October could fall by 10 to 12 million tons, which means that crop yields could dip by as much as 7.7% yr on yr, Nomura said.

“The impact of a rice export ban by India can be felt each directly by countries that import from India and in addition not directly by all rice importers, due to its impact on global rice prices,” in response to a report by Nomura released recently. 

Findings from Nomura revealed that the associated fee of rice has remained high this yr, with the rise in prices in retail markets hitting around 9.3% yr on yr in July, compared with 6.6% in 2022. Consumer price inflation (CPI) for rice also spiked 3.6% year-on-year as of July, up from 0.5% in 2022. 

The Philippines, which imports greater than 20% of its rice consumption needs, is the country in Asia most prone to higher prices, Nomura said.

As Asia’s biggest net importer of the commodity, rice and rice products account for a 25% share of the country’s food CPI basket, the very best share within the region, in response to Statista.

Inflation within the country was at 6.3% in August, data from the Philippines Statistics Authority showed — above the central bank’s goal range of two% to 4%. In light of that, India’s export ban would come as an extra blow to the Southeast Asian nation.

Similarly, India’s rice export ban will likely be detrimental to Indonesia as well. Indonesia is more likely to be the second-most affected country in Asia.

Nomura reported that the country relies on imports for two.1% of its rice consumption needs. And rice makes up about 15% of its food CPI basket, in response to Statista.

For another Asian countries, nonetheless, the pain is more likely to be minimal.

Singapore imports all of its rice, with 28.07% of it coming from India in 2021, in response to Trade Map. However the country is not as vulnerable because the Philippines and Indonesia as “the share of rice within the [country’s] CPI basket is kind of small,” Varma noted. 

Consumers in Singapore are likely to spend “a greater chunk” of their expenses on services, which usually appears to be the case for higher-income countries, she said. Low- and middle-income countries, however, “are likely to spend a fair larger proportion of their expenses on food.” 

“The vulnerability must be seen from the angle of each the impact on expenditure for consumers and the way dependent countries [are] on imported food items,” she added. 

Countries that can profit 

On the flip side, some countries may very well be beneficiaries.

Thailand and Vietnam will most probably to take advantage of India’s ban, Nomura said. That is because they’re the world’s second- and third-largest exporters of rice, making them the most probably alternatives for countries seeking to fill the gap.

Vietnam’s total rice production was roughly 44 million tons in 2021, with exports bringing in $3.133 billion, in response to a report published in July by research firm Global Information found.

Data from Statista showed that Thailand produced 21.4 million tons of rice in 2021, a rise of two.18 million tons from the previous yr.

With the rise in exports, and India’s ban placing an upward pressure on rice prices, the general value of rice exports will increase and these two countries will profit from it. 

“Anybody who’s currently importing from India will likely be seeking to import more from Thailand and Vietnam,” Varma said. 

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