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    Rice price rise a concern as food inflation accelerates in India

  • Date : 21 June, 2022

     Concerns around elevated wheat prices made analysts apprehensive of the chances of consumers shifting to rice in a bid to opt for cheaper food options which could lead to an uptick in its prices.

    The  of rice has remained stable for now, owing to ample inventory and robust production. But this could change if the customers switch to rice which could lead to a depletion in stockpiles and trigger restrictions on exports. Rice remains the primary staple for more than half the world's population and about 90% of it is grown in Asia.

    Farmers and the Indian government are banking on the monsoon to keep rice production, inventories and food inflation at a manageable level.

    “As a higher price for one food item can lead to substitution effects, we expect a further broadening of food price inflation. In particular, we are monitoring rice prices closely. At the current stage, the risk of rice protectionism is low, because rice prices have been relatively stable, despite the surge in wheat prices,” Nomura said in a note.

    But with ample global rice inventory, the situation isn’t dire, yet.

    “However, if rising wheat prices lead to substitution towards rice, this could lower existing stocks, trigger restrictions by key producers for domestic food security reasons and lead to higher rice prices over time. World rice exports, at 52.6mn tonnes in the latest season, were only 10.3% of total rice production (512.8mt); so a restriction by any one exporter can have an outsized impact on world rice markets,” it said.

    Data from the United States Department of Agriculture shows that India has the largest share in the rise in global consumption and global production of rice in 2022-23.

    Further, India’s exports are projected to increase 1.0 million tons to a record 22.0 million tons and account for almost 41% of global shipments. India’s projected exports exceed the combined shipments of the next three-largest exporters of rice, namely, Thailand, Vietnam, and Pakistan.

    India is the biggest exporter of rice and many countries have been worried that like wheat and sugar, rice too may be put under export control, something that the Indian government has assured it wouldn’t do. In this scenario, a sudden change in plans could exacerbate the food inflation situation.

    When it comes to food inflation in India, Nomura expects it to remain elevated through 2022, averaging over 8.0% on an annual basis, up from 3.7% in 2021. It also said that when combined with local idiosyncratic factors, rising feedstock costs, fertiliser shortages and protectionism, food price inflation in Asia will rise further in H2 2022, with the sharpest acceleration in South Korea, India, Hong Kong, the Philippines and Singapore.

    India, the third-largest producer of wheat in the world, had put in place export restrictions after a torrid heatwave led to sharply lower wheat production estimates for the year and global markets were worried that rice could be next.

    “As things stand today, there is every reason to be optimistic for the crops to be good given the supportive monsoon,” Siraj Chaudhry, managing director at National Commodities Management Services told Bloomberg TV in an interview earlier this month. There is “no reason to believe” that there will be any ban on rice shipments as India exports only about 20% of its output and there are sufficient stocks, he said.

    Source: The Economic Times



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