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Rumor has turned to the fact in a big way this week, as India has officially banned the export of non-Basmati white rice, making Basmati and Parboiled rice still available. This is jaw-dropping news for rice buyers around the globe who rely on cheap rice prices courtesy of India’s break-neck production and exports of the grain. Last year, India exported 17.8 million metric tons of non-Basmati rice, where nearly 7 MMT was white rice. The Indian government is saying, however, that white rice exports will be allowed with permission to countries who are working to meet food security needs. This news will certainly shake the market, and these government-to-government food security agreements will likely take too long to execute without recognizing some sort of price increase. Estimates from the trade are saying that long grain prices around the globe could rise by $100 pmt shortly, but that remains to be seen. India is the world’s leading exporter, handling more than 40% of the global rice trade.
The implications for the U.S. rice industry and rice trade in the Western Hemisphere are clear: This is good for U.S. long grain as it returns to a normal size crop and can viably compete in the export market in the coming year. India has been the global low-price leader for years, and removing their supply will inevitably increase prices out of Thailand, Vietnam, and Pakistan. The greatest fear the U.S. rice trade has is the intrusion of cheap rice from these far-east origins into our core-market strongholds like Mexico, Haiti, and South America. This development will help secure the increased U.S. acreage as the primary source for rice in the Western Hemisphere in the coming year, at prices higher than anticipated. Additional news out of Ecuador, Venezuela, Peru, and other regions indicate El Niño weather conditions have caused significant damage to production and will result in increased import needs.
The July FAO Rice Price Index showed a drop of 1.2% from May to June to 126.2 points, which is still 14% above last year. The drop was largely on account of medium grain and aromatic varieties seeing price decreases as supply wanes and expectations for a large new crop (for medium grain) are weighing on the market. We expect to see this trend reverse immediately for the August FAO report with India’s export ban.
In Asia, we have been reporting firm pricing out of both Thailand and Vietnam based on strong demand, with FOB prices exceeding $515 pmt for both origins. Now with the largest exporter in India exiting the market, this firmness is all but guaranteed to jump in the coming weeks, with some calling for prices in excess of $600 pmt. We do hope that the market won’t react like it did in 2008 when India announced an export ban; it would appear that India has learned how to quell an overreaction with the allowance of Parboiled and Basmati exports, along with G2G food security exports with permission. The bottom line here is that domestic prices in India will drop sharply, which is the purpose and goal of this ban, and export prices will increase sharply, which is a fundamental byproduct of the decision.
Harvest has just begun in some regions of Texas and Louisiana, with optimism high but no real yields or milling qualities to show for it. Outside of isolated rain pockets and weather systems, things are good. Mills are sitting on pins and needles waiting to get new crop running through plants to take advantage of these new pricing opportunities afforded by India’s exit.
Perhaps we will see a reversal in the dismal Export Sales report by this time next year, as the current report shows net sales of only 2,800 MT, down 32% from last week and 74% from the prior 4-week average. Exports of 21,400 MT were up noticeably from the previous week, but down 37% from the prior 4-week average.
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