It seems no one is happy about India's rice policies
Sep 09, 2022
NEW DELHI, INDIA – Overnight, it was announced that all non-basmati and non-parboiled rice exports out of India would incur a 20 percent export tariff in addition to the recent ban put in place for exports of broken rice. In essence, these restrictions will make India, the world’s largest rice exporter, less competitive in the global market and will result in greater inflation of food costs throughout Africa, Asia, and parts of Europe.
The restrictions are supposedly intended to help maintain the domestic rice supply, following a small reduction in planted acres this season. The announcement comes several months after export restrictions were put in place for Indian sugar and wheat, which contributed to additional spikes in global commodity prices.
“This move by India is not surprising at all,” said Bobby Hanks, rice miller and chair of the USA Rice International Trade Policy Committee. “When you over-subsidize your farmers to the degree India has and you try to take risk out of the production process, you lose the natural resiliency that market-based economies have and it’s difficult for your supply and demand to balance out when there’s weather and market disruptions. If India were a market-based economy, their prices would have never stayed so artificially low for so long and they wouldn’t panic over a small reduction in acreage following a record year for production.”
Earlier this summer, the U.S. along with Australia, Canada, Japan, Paraguay, Thailand, and Uruguay initiated consultations with India at the World Trade Organization under the Bali Peace Clause to further investigate India’s trade distorting policies for rice.
“We are hopeful that the USTR will continue to take actions toward correcting India’s rice policies, including a full dispute settlement case,” said Hanks. “Every protectionist act like we saw this week is just further manipulating and distorting the global rice market and they control more than 40 percent of it.”
Of this new action by India, Peter Storey, USA Rice member and UK-based global lead for rice analysis at S&P Global Platts, said, “The Asian rice markets are still taking stock of what India’s broken rice ban and 20 percent tax on head rice means in the broader picture. It is generally anticipated that there will be more clarity on the finer details of the government decrees next week, but, in theory, the 20 percent tax puts India more in line with other Asian prices for 5 percent broken white rice. And with U.S. long grain white rice still priced around $250 per metric ton above most of the major Asian origins, it seems doubtful that it will affect the U.S. export market much in the near term.”
Because of India’s artificially low prices, world market prices for rice have remained stagnant throughout the last three years as pandemic and war-related actions caused other commodity prices to skyrocket. As input costs for all crops increased over the last year, U.S. rice farmers never saw a commensurate rise in market prices because of India’s price distortion, which will likely result in tight or negative margins for this crop year.