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RAIN RAIN, (DON'T) GO AWAY!

Erratic rains in the world's top rice-exporting country threaten global prices

Woman working on paddy fields in Assam
REUTERS
Published

Poor rainfall in major rice-growing regions of India has triggered fears of export restrictions on rice, too, after wheat and sugar.

Looking to control domestic prices, India had in May banned wheat and sugar exports amid a scorching summer and a global supply shortage.

Being the world’s largest exporter of rice, India accounts for 40% of the international trade in the commodity. It shipped a record 21.5 million tonnes abroad in 2021. More than 100 countries, including those of west Asia alongside Nepal and Bangladesh, import Indian rice. China, too, entered the list recently and almost immediately went on to become its largest importer.

In 2021-22, about 510.28 million tonnes of rice was consumed worldwide. Lower production in India could, thus, cause a global crunch and set its price on fire.

While wheat and corn prices have surged following the Ukraine war, ample production and stocks have cushioned rice till now. The monsoon’s erratic progress in India this year may threaten that stability.

Dependence on Indian monsoon

On an average, India produces 112.44 million tonnes of rice every year. Its most important paddy-growing regions are West Bengal, Uttar Pradesh, Bihar, Jharkhand, Telangana, Chhattisgarh, and Odisha accounting for more than 85% of its annual output.

Paddy is a water-heavy crop and, like India in general, is heavily dependent on the annual monsoon.

The overall rainfall in India this monsoon has been around 17% of the long-term average till now, and deemed good statistically. This is even up 9% from last year for the same period.

However, precipitation has not been uniform across the country. Some states have received little-to-no rain. For instance, of the 85 dry districts, 42 are in Uttar Pradesh alone.

In states like Uttar Pradesh and West Bengal, therefore, rice production is set to fall. What’s worse, the India Meteorological Department has forecast less-than-normal rainfall in many parts of India for August and September, too.

“Rarely any sowing happens after mid-July, so the hope that it will recover is unlikely to be the case,” Himanshu, a professor at Jawaharlal Nehru University told Bloomberg.

In all, it is estimated that the total area of rice plantation has fallen 13% so far in the country this year due poor rains.

A fall in crop output, Himanshu said, is a risk to inflation.

India’s fight against food inflation

Food prices have remained high in India this year, with June’s reading at 7.75%.

The figure is expected to top 9% in the second half of 2022 due to higher fodder
costs and an uptick in the government’s minimum support prices for farmers, according to a Nomura report.

Prices of some varieties of rice have risen by more than 10% in the past two weeks in West Bengal, Odisha, and Chhattisgarh due to deficient rain and increased demand from Bangladesh .

Export prices are expected to increase to $400 a tonne by September, from $365 now, according to Mukesh Jain, a director at Sponge Enterprises, a Raipur-based rice-shipping company.

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