Rising Prices and Competitive Landscape in the Global Rice Market
Prices of Indian rice have experienced a substantial increment of 10% in the global market over the past few weeks. One particular reason behind the rising prices is its limited availability. Remarkably, despite this increase, Indian rice remains competitive in the global market because prices of other cereals in the international market have gone up. Nevertheless, the higher prices have led to a decline in export demand.
Paddy Shortage and Price Hikes; People asking for cheaper rice
Traders have reported a shortage of paddy, especially in the southern regions, which has led to price hikes. S. Chandrasekaran, a trade analyst based in Delhi, emphasized the lack of parity between paddy and rice rates. As a result, the cost of rice has risen, with 5% white rice experiencing a minimum increase of USD 25 per tonne, reaching levels of USD 490.
This has affected business activities, as buyers perceive the prices to be high. Only inquiries for inexpensive rice from Singapore and East Timor are being received. Madan Prakash, the President of the Agricultural Commodities Exporters Association (ACEA), explained that no significant transactions are taking place due to the prevailing high prices. A scarcity of paddy is reported from centres such as Thoothukudi in Tamil Nadu.
Flooding and the Impact of Government Policies
Concerns about floods impacting paddy production in North India and deficient rainfall affecting the area under cereal cultivation during the current kharif sowing season have caused the prices to soar.
Some trade participants attribute the surge in prices to the Chhattisgarh government’s decision to raise the Minimum Support Price (MSP) of paddy to USD 0,34 per kg. BV Krishna Rao, President of “The Rice Exporters Association of India” (TREA) mentioned that rice prices are now reflecting the MSP set by the government for the 2023-24 crop year. The MSP for common rice varieties has been raised to USD 0,26 per kg from USD 0,24 last year. Traders unanimously believe that prices may begin to cool down from September onwards.
Market Outlook and Forecasts for the Global Rice Market
Research agency BMI predicts that the global rice market will gradually ease during the 2023-24 season, transitioning from an estimated deficit of 9.9 Million Tonnes in 2022-23 to a narrower deficit of 1 Million Tonnes. However, the confirmed occurrence of El Nino could pose a risk and temporarily support prices. In spite of these developments, the US Department of Agriculture anticipates India’s rice exports to reach 24 Million Tonnes in the 2023-24 marketing season (September-August), while projecting rice production in India at 134 Million Tonnes compared to the record-breaking 136 Million Tonnes achieved this season.
Conclusion
The rise in Indian rice prices, approximately 10% in the global market, has posed challenges for export demand. The rise in prices can be attributed to factors such as the scarcity of paddy, reports of non-availability, and fears of production being affected by adverse weather conditions. However, market analysts anticipate prices to stabilize from September onwards, while global market conditions and the confirmed occurrence of El Nino could still impact rice prices. Despite these challenges, India’s rice exports are projected to increase, albeit with a slight decrease in production compared to the previous season. In these regards, one can procure a rise at present, reduction of prices is not expected in the near future.