With many countries already struggling with soaring food prices, India’s faltering rice production will affect food security in countries that import rice from the nation.
Since India, by far the world’s largest exporter has had a lack of rain in some areas, planting areas for rice have shrunk to their smallest size in nearly three years. This could pose a new challenge to the global food supply.
At a time when countries are struggling with soaring food prices and widespread inflation, India’s capability to produce rice is at risk. Due to a scarcity of rainfall in some regions, particularly West Bengal and Uttar Pradesh, which account for a quarter of India’s output, the total area planted with rice has dropped by 13% thus far this season.
Traders are concerned that a decline in rice output could make India’s battle against inflation more difficult and could lead to export restrictions. For the billions of people who depend on the food staple, such a decision will have significant ramifications.
In order to defend food security and maintain local prices, the government has already limited wheat and sugar exports from India, which accounts for 40 percent of the world’s rice trade. India’s rice prices have increased, which reflects worries over the produce.
Due to inadequate rain and increased demand from Bangladesh, prices of some types have jumped by more than 10 percent in the last two weeks in major growing states like West Bengal, Odisha, and Chhattisgarh, according to Mukesh Jain, a director of rice shipper Sponge Enterprises Pvt.
He predicted that free-on-board export pricing could increase to $400 per tonne by September from as much as $365 at the moment.
Asia produces and consumes the majority of the world’s rice, making it important for the region’s political and economic stability. Rice prices have been moderated as an outcome of plentiful production and stockpiles, in contrast to the spike in wheat and corn prices following Russia’s invasion of Ukraine, which has helped avert a worsening of the food crisis.
The success of the monsoon and the Indian rice crop will have a significant impact. According to some agrarian specialists, there is still time to plant more crops and makeup part of the gap. August through September is hoped to have typical rainfall, which could boost crop yield.
Farmers are upset. Due to a lack of rain in June and July, according to grower Rajesh Kumar Singh, 54, he was only able to sow rice on half of his seven acres (2.8 hectares) of land in Uttar Pradesh. He declared the situation to be absolutely precarious.
According to Himanshu, a professor at Jawaharlal Nehru University, rice prices are under pressure. The prospect that it will rebound is unrealistic, he said, adding that a decrease in output poses a risk to inflation because very little sowing occurs beyond mid-July.
Rice may provide a new hurdle in India’s battle against inflation. This year, consumer prices continued to exceed the Reserve Bank of India’s tolerance level of 6 percent, which caused a dramatic rise in interest rates. As the impact of declining commodity prices, such as those for fuel and vegetable oils, is somewhat opposed by a weakening rupee this week, the central bank may elevate borrowing costs further.
According to Sonal Varma, an economist at Nomura Holdings Inc., persistent geographic differences in rainfall might have a negative effect on crop production, which would then have a negative influence on economic growth and inflation.
Top export customers in India
With Bangladesh, China, Nepal, and some Middle Eastern countries among its top clients, India exports rice to more than 100 nations. There are some promising signs for the global food security situation. In the forthcoming weeks, the US is anticipated to produce a bountiful crop of wheat, and Ukraine has sent its first grain shipment since Russia’s invasion.
Rice for Ethanol production
According to Siraj Hussain, a former secretary of India’s agriculture ministry, the government should think about revisiting its strategy of assigning rice for ethanol production as India’s paddy crop is expected to fall in various areas.
In an attempt to lower its fuel prices, India wants to increase the manufacturing of ethanol by using extra sugar and rice. A “food vs. fuel” debate has been nudged by the rise in food costs that has followed the conflict in Ukraine.
Hussain stated that it is difficult to determine the precise amount of production loss at this time. However, he continued, there is rarely any reason to allocate rice for ethanol production at the current price.
