Impact on Philippines, Indonesia, Thailand: Nomura

Rice production in India has declined by 5.6% year-on-year since September, in light of below-average monsoon rains, which impacted the harvest, Nomura said.

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India, the largest rice exporter in the world, has banned shipments of broken rice, a move that will affect all of Asia, according to Nomura.

In an effort to control domestic prices, the government banned exports of broken rice and imposed a 20% export tax on various rice varieties starting September 9.

Nomura said the impact on Asia will not be uniform and the Philippines and Indonesia will be the most vulnerable to the ban.

India accounts for about 40% of global rice shipments, exporting to over 150 countries.

Exports reached 21.5 million tons in 2021. This is more than the total shipment from the next four largest wheat exporters: Thailand, Vietnam, Pakistan and the United States, Reuters reported.

But production declined 5.6 percent year-on-year as of September 2, in light of below-average monsoon rains, which impacted the harvest, Nomura said.

For India, July and August are the “most crucial” months for rainfall, as they determine the amount of rice planted, said Sonal Varma, chief economist at the financial services firm. This year, the irregular monsoon rains during those months reduced production, he added.

Large rice producing states of India such as West Bengal, Bihar and Uttar Pradesh is receiving 30% to 40% less rainfall, Varma said. Although rainfall increased towards the end of August, “the more the sowing was delayed [of rice] that is, the greater the risk that the return will be lower. ”

Earlier this year, the South Asian nation curbed grain and sugar exports to control rising local prices as the Russia-Ukraine war sent global food markets into turmoil.

Most affected

The Indian government recently announced that rice production during the southwest monsoon season between June and October could decrease by 10-12 million tons, implying that yields could decrease by up to 7.7% on a basis. annua, Nomura said.

“The impact of an Indian export ban on rice would be felt both directly by countries importing from India and indirectly by all rice importers, due to its impact on global rice prices,” he said. a recently published Nomura report.

Nomura’s findings revealed that the cost of rice remained high this year, with price increases in retail markets reaching around 9.3% yoy in July, compared to 6.6% in July. 2022. Consumer price inflation (CPI) for rice also increased 3.6% yoy in July, up from 0.5% in 2022.

The Philippines, which imports more than 20 percent of its rice needs, is the Asian country most at risk of rising prices, Nomura said.

As Asia’s largest net importer of commodities, rice and rice-based products account for a 25% share of the country’s food CPI basket, the highest share in the region, according to Statista.

Inflation in the country was 6.3% in August, according to data from the Philippine Statistical Authority, above the central bank’s target range of 2% to 4%. In light of this, India’s export ban would represent a further blow to the Southeast Asian nation.

Likewise, India’s ban on rice exports will also be detrimental to Indonesia. Indonesia will likely be the second most affected country in Asia.

Nomura reported that the country relies on imports for 2.1% of its rice needs. And rice makes up about 15 percent of its CPI food basket, according to Statista.

For some other Asian countries, however, pain is likely to be minimal.

Singapore imports all of its rice, with 28.07% coming from India in 2021, according to Trade Map. But the country is not as vulnerable as the Philippines and Indonesia as “the share of rice in the [country’s] The CPI basket is quite small, ”noted Varma.

Consumers in Singapore tend to spend “a larger chunk” of their spending on services, which generally appears to be the case in higher-income countries, he said. Low- and middle-income countries, on the other hand, “tend to spend even more of their spending on food.”

“Vulnerability must be seen from the perspective of both the impact on consumer spending and how dependent countries are [are] on imported foods, “he added.

Countries that will benefit

On the other hand, some countries may be beneficiaries.

Thailand and Vietnam will most likely profit from India’s ban, Nomura said. This is because they are the second and third largest rice exporter in the world, making them the most likely alternative for countries looking to bridge the gap.

Vietnam’s total rice production was around 44 million tons in 2021, with exports bringing in $ 3.133 billion, according to a report released in July by research firm Global Information.

Statista data showed that Thailand produced 21.4 million tons of rice in 2021, an increase of 2.18 million tons from the previous year.

With increased exports and India’s ban on exerting upward pressure on rice prices, the overall value of rice exports will increase and these two countries will benefit.

“Anyone who currently imports from India will try to import more from Thailand and Vietnam,” Varma said.


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