With a shortage of rain in parts of India, rice could surface as the next challenge for global food supply. This is because India is by far the world’s biggest exporter and a deficit of rain has caused planting areas to shrink to the smallest in about three years.
The risk to India’s rice production comes at a time when countries are dealing with mounting food costs and extensive inflation.
Total rice planted area has declined 13% so far this season due to a lack of rainfall in some areas, including West Bengal and Uttar Pradesh, which account for a quarter of India’s output. Traders are worried that a drop in rice production will complicate India’s inflation fight and trigger restrictions on exports. Such a move will have far-reaching implications for the billions of people that depend on the staple.
India accounts for 40% of global rice trade, and the government has already curbed wheat and sugar exports to safeguard food security and control local prices.
The RISE in India’s rice rates creates concern about production. Prices of some varieties have climbed more than 10% in the past two weeks in major growing states such as West Bengal, Odisha, and Chhattisgarh due to deficient rain and increased demand from Bangladesh. Export prices may climb to $400 a ton by September from as much as $365 now on a free-on-board basis.
Most of the world’s rice is grown and consumed in Asia, making it vital for political and economic stability in the region. In contrast to the surge in wheat and corn prices after Russia’s invasion of Ukraine, rice has been restrained due to ample production and stockpiles, helping to ward off a bigger food crisis.
So much depends on the rice crop in India and the monsoon’s progress. Some agricultural scientists are hopeful that there’s still time to continue planting and make up for some of the shortfall. Rain is forecast to be normal for August to September, which may improve crop output, but farmers are less upbeat.
According to Sonal Varma, an economist at Nomura Holdings Inc , consumer prices have been maintained above the Reserve Bank of India’s tolerance limit of 6% this year, prompting a sharp rise in interest rates. The central bank may increase borrowing costs further this week as a weakening rupee offsets the impact of falling commodity prices such as fuel and vegetable oil. If geographic disparities in rainfall persist, it could have a detrimental impact on crop production, negatively impacting economic growth and inflation.
India supplies rice to more than 100 countries, with Bangladesh, China, Nepal, and some Middle Eastern nations among its largest customers. For the world at large, there are some bright spots when it comes to food security.
The US is expected to deliver a bumper wheat crop in the coming weeks, while Ukraine made its first grain shipment since Russia’s invasion. According to Siraj Hussain, a former secretary of India’s agriculture ministry, with India’s paddy output poised to decline in several states, the government should consider reviewing its policy of allocating rice for ethanol production.