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Indian rice export ban fuels price fears

22 July 2023

Mr Chookiat said as a result of India's rice ban, Thai rice exports are expected to be significantly impacted.

Thai rice exporters are fretting over India's announcement that it will ban the export of non-basmati white rice with immediate effect, saying the move could potentially impact Thailand's rice industry, leading to a possible 10% increase in domestic prices.

Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said the ban is likely to prompt Thai rice mills and rice exporters to delay rice purchase orders in order to evaluate the impact, as India is the world's biggest rice exporter.

India, which accounts for 40% of world rice exports, on Thursday ordered a halt to its largest rice export category to reduce domestic prices, which have climbed to multi-year highs in recent weeks as erratic weather threatens production.

According to Reuters, global wheat prices jumped more than 10% this week, their biggest weekly gain in more than 16 months as Russian attacks on Ukrainian ports raised worries over global supply.

Rice is a staple food for over 3 billion people, and nearly 90% of the water-intensive crop is produced in Asia, where the dry El Niño weather pattern is likely to curb supplies.

"Thai rice traders are closely monitoring the situation, as initially we expected that the Indian government might adopt alternative measures instead of an export ban. However, after the ban was announced, it is difficult to guess the impact on the overall global rice market. We need to closely monitor and reassess the situation to see whether India would ease its ban," Mr Chookiat said.

He said that as a result of India's ban, Thai rice exports are expected to be significantly impacted, particularly with regard to the pricing of different varieties for which purchase contracts are still pending.

Thai rice exporters and domestic traders may need to hold off on purchase contracts, as they expect India's move may drive global prices higher.

The marketing of Thai rice for the latter half of the year is expected to be challenging. However, it is believed that during this short-term period, both Thai rice exporters and the domestic rice market may have to carefully quote the rice prices, according to Mr Chookiat.

"It is anticipated that domestic rice prices may need to be adjusted upwards by at least 10%. However, in general, we don't want to see such an increase. Both private sectors and government agencies have to accelerate the search for alternative solutions, especially in finding new markets to replace existing ones, in order to delay the price adjustments within the country," he said.

"At present, the cultivation of Thai rice itself is facing problems of drought in several areas, which raises concerns that the quantity of Thai rice this year might decrease. All parties involved will have to expedite finding ways to address these challenges."

A Commerce Ministry source said Commerce Minister Jurin Laksanawisit is aware of India's problem and has instructed the private sector and Thai commercial attachés in India to investigate the details of the ban, particularly concerning the exemption of Basmati rice.

The Commerce Ministry is to hold a joint meeting with the private sector next week to prepare a plan to cope with the impact, if the ban is true, the source said.

Source: Bangkok Post