Global Markets: Rice – India Imposes Export Restrictions on Certain Varieties

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    India, the largest rice exporter, implemented policies on September 9 to restrict its exports. The government imposed a ban on exports of 100 percent broken rice (HS 100640) and also is applying 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 that India has placed on its exports since it lifted its 3-year ban on non-basmati rice in 2011. Since that time, India has become the primary rice exporter, expanding its domination so that in 2021, India accounted for 41 percent of total global exports, larger than the next 4 exporters (Thailand, Vietnam, Pakistan, and the United States) combined.

    India supplies more than half of global broken rice exports, which are discussed in further detail on page 10. As a result of this ban, the forecast for total rice export has been cut to 20.3 million tons for 2022 and 20.0 million tons for 2023.

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

    As shown in the graph below, the 20 percent export tariff applied to the export quote for September 9 results in a price above most Asian exporters except for Thailand. The export tax was implemented with less than a day’s notice, leaving exporters scrambling.

    India exports a variety of types of rice and this ban notably excludes basmati and parboiled rice. Basmati rice is a type of fragrant rice that commands a premium and is primarily exported to the Middle East, Europe, and North America. India’s basmati rice exports have averaged around 4.3 million tons annually. India is the primary exporter with Pakistan as the main competitor.

    Parboiled rice is produced by steaming regular paddy rice under pressure and then milling it, resulting in different cooking characteristics favored among some parts of India, Bangladesh, parts of Africa, and Saudi Arabia. Since paddy rice can either be processed into regular white rice or parboiled rice, the new policy may encourage more shipments of parboiled, since it will not be taxed.

    However, over the past several years, India has seized an increasing share of global parboiled exports, shipping 4.1 million tons in the first 7 months of 2022, compared to 0.7 million tons from Thailand for the same period.

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

    Bangladesh imports both regular white rice as well as parboiled, so this may shift the type of rice it is buying from India. Nepal has also become a major rice importer, almost entirely dependent upon India because of its landlocked geography. It has been importing milled white rice and paddy rice, both of which will be taxed in this new measure. Sri Lanka is another country that has had smaller production, high prices, and increased imports, sourcing both parboiled and regular white rice from India.

    India’s Ban on Broken Rice Exports to Disrupt Global Market

    For 2022, rice trade is estimated to contract, in part due to the new Indian policy to ban exports of broken rice. In 2021, global broken rice trade was up 53 percent reaching 6.7 million tons. So far, for the first half of 2022, broken rice exports are at 4.8 million tons, up 39 percent compared to the same period in 2021. India’s new policy will eliminate this trade, which was more than half of global broken rice trade.

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    Prior to 2021, broken rice contributed roughly 10 percent of total rice exports. For the first half of 2022, broken exports accounted for nearly 20 percent. The rising demand began during India’s record high exporting year with low-cost rice and an abundant supply. India’s largest markets have been China, Senegal, and Vietnam.

    Historically, Senegal has been the largest destination for India broken rice and continues to be a key market but has fallen from the top spot. Senegal uses broken rice for one of its staple dishes. However, since 2021, China and Vietnam have bought significant volumes of broken rice. China (the world’s largest producer) continues to be the largest rice importer and has shifted to purchasing more broken rice for animal feed.

    More surprisingly, Vietnam (the third largest exporter) has become a major importer, purchasing broken rice from India due to the significant difference in prices. India’s broken rice is more competitively priced compared to China and Vietnam’s domestic rice, as well as some feed grains. The rice has been mainly used for animal feed as well as in liquor manufacturing and for processed food.

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

    Thai Rice Exports Rebound to Largest in 3 Years

    Thai rice exports continue to rebound in 2022 and are forecast at 7.5 million tons, the largest since 2019. In the first 7 months of the year, exports are up nearly 60 percent compared to the same period last year. The key factors are increased market share in Iraq, more fragrant exports, additional broken rice shipments, and more opportunities since India has 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 began to make some inroads in 2021 and has over 75 percent market share in the first 7 months of 2022. Thailand is shipping white rice at prices averaging under $400/ton, which is gaining market share over more expensive Indian rice varieties. So far this year, Thailand has shipped its largest exports to Iraq since 2013.

    Thai fragrant rice exports are up 40 percent compared to the same time last year at 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.

    Overall, prices are down 10 percent for fragrant milled rice. This has spurred U.S. imports of jasmine rice to record levels, up nearly 50 percent from last year. Jasmine rice now accounts for over half of U.S. imports, which are forecast at a record.

    Another key factor to Thailand’s export growth has been a rebound in broken rice exports. Demand has been very strong from China, so Thai broken rice exports have risen there. With the implementation of India’s ban on broken rice exports, Thai broken rice has more opportunities.

    In addition, India’s export tax on non-parboiled, non-basmati rice may further open opportunities for Thailand to ship more milled rice. Thai rice exports are expected to maintain a strong pace throughout the remainder of 2022 and are forecast to rise further to 8.0 million tons in 2023.

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