New Delhi, Oct. 10 - India's ban with immediate effect on exports of non-basmati rice may push up global prices as shipments of around 1.0 million metric tons have slipped into uncertainity, industry officials said Tuesday.
Tuesday, India also banned exports of wheat flour, extended the ban on exports of wheat for an indefinite period and extended the time period for restriction-free wheat imports indefinitely.
India is one of the largest exporters of rice by volume and ships out around 300,000 tons of non-basmati rice and 100,000 tons of basmati each month.
The decision to ban exports could even lead to malpractises if some unscruplous exporters try to ship out non-basmati rice claiming it to be basmati, traders said.
Basmati is a premium grade long grain rice grown only in some parts of the Indian subcontinent.
"Global prices may go up around 10% because India is one of the few big players in the global rice market," said Prem Garg, Managing Director, Shivnath Rai Harnarain India - the country's largest non-basmati rice exporter by volume.
He said trading companies have orders for exports of around 1.0 million tons yet to be be implemented, for which a line of credit for shipments of around 300,000 tons is already open.
Garg said his own company has pending orders for exports of around 400,000 tons of rice.
Shivnath Rai exports around 900,000 tons rice annually.
The globally traded surplus of rice annually is only around 28 million tons, of which 3.5 million tons is supplied by India, said S. Chandrasekhran, a New Delhi-based commodities consultant.
He said since India has a share of 12.5% in global rice exports, its withdrawal from international markets is quite bullish.
"Global prices could go up by 8%-9%," said Chandrasekhran.
Several African and Asian countries are heavily dependent on supplies from India.
Chicago Board of Trade rice futures settled higher Monday in active trading as strong buying in March pushed prices sharply higher across the board.
November rice rallied 18 cents to $11.73 per hundredweight, January rose 18 cents to $12.05 and March jumped 27 cents to $12.35.
Tight Global Supplies
Garg said Pakistan may take advantage of an Indian ban on exports of rice and try to capture a larger share in global markets.
However, Chandrasekhran said, Pakistan has limited supplies in parboiled varieties of rice and the upward pressure on their prices will be even stronger.
"Already long grain rice supplies worldwide have fallen in the last year due to problems related to genetic modification in the U.S.," noted Gurnam Arora, Joint Managing Director, Satnam Overseas, another major rice exporter.
He said with India now withdrawing from global rice trade, international prices are bound to rise.
Chandrasekhran said global rice stocks as a percentage of total annual world output has declined steadily to around 22% from 30% over the last few years.
Exporters, however, expressed the hope that they will be allowed to ship out at least those volumes for which a line of credit had already been opened.
"I think pre-ban export commitments will be allowed to be met," said Arora.
Ban Aims To Boost Local Supplies
Finance Minister P. Chidambaram said domestic sales of rice under the government's subsidized sale programs doubled in the last couple of years.
Analysts said as global wheat prices have tested new highs almost daily and there is speculation over possible elections to the lower house of the Indian parliament in 2008, nearly a year ahead of schedule, the government is keen to ensure ample supplies of foodgrains to consumers at affordable prices while also providing remunerative returns to farmers.
India has increasingly subsitituted wheat with rice in these programs to minimize imports of the latter.
The government sells around 2.0 million tons of rice each month at subsidized rates to local consumers.
"The ban is very timely and may ensure that India doesn't have to import rice," said Anil Mittal, Managing Director, KRBL Ltd, one of India's largest basmati rice exporters by volume.
He said global wheat suppliers more than doubled their prices after India started importing the grain last year.
Such a situation has to be avoided in rice.
Chandrasekhran said local rice supplies are expected to remain tight this year because the crop has been damaged in several provinces due to floods or deficient rains.
India Tuesday raised the intervention price of rice by INR500/ton for the 2007-08 harvest, over and above the INR650/ton hike announced in May when the plantings started.
So the total hike on the year works out to be INR1,150/ton on-year.
The government's rice purchases from farmers are currently lagging on-year as farmers were holding back their grain in anticipation of the price hike.
Analysts said a lag in local rice purchases may have forced the government to act immediately because Agriculture Minister Sharad Pawar said Friday that there are no plans to ban exports.
Both Arora and Mittal are optimistic that once the government is able to purchase its requirements from farmers, the ban will be lifted.