Economy · August 6, 2022

The world food supply faces a new threat due to the lack of rain in India

Rice could emerge as the next challenge for global food supply as rainfall shortages in parts of India, by far the world’s largest exporter, have reduced planting area to its smallest level in about three years. .

The threat to India’s rice production comes at a time when countries are grappling with rising food costs and rampant inflation. Total area under rice cultivation has decreased by 13% so far this season due to lack of rainfall in some areas, including West Bengal and Uttar Pradesh, which account for a quarter of Indian production.

Traders are concerned that a drop in rice production will complicate India’s fight against inflation and trigger export restrictions. Such a move will have far-reaching implications for the billions of people who depend on the staple. India accounts for 40 percent of the world’s rice trade and the government has already curbed exports of wheat and sugar to safeguard food security and control local prices.

The jump in rice prices in India reflects concern over production. The prices of some varieties have increased by more than 10% in the past two weeks in major growing states such as West Bengal, Odisha and Chhattisgarh due to shortage of rain and increased demand from Bangladesh, Mukesh said. Jain, director of Sponge Enterprises Pvt., A rice shipper. Export prices could rise to $ 400 a ton by September from as high as $ 365 now on a free-on-board basis, he said.

Most of the world’s rice is grown and consumed in Asia, which makes it vital for the region’s political and economic stability. In contrast to the soaring prices of wheat and corn following the Russian invasion of Ukraine, rice has been subdued due to large production and inventories, helping to avert a greater food crisis.

Much is riding India’s rice harvest and the progress of the monsoon. Some agrarian scientists are optimistic that there is still time to continue planting and compensate for some of the shortage. Rain is expected to be normal from August to September, which could improve crop yield.

Farmers are less optimistic. Rajesh Kumar Singh, 54, a farmer in Uttar Pradesh, said he only planted rice on half of his seven acres (2.8 hectares) of land due to lack of rain in June and July. “The situation is really precarious,” he said.

Rice prices are feeling the pressure, said Himanshu, a professor at Jawaharlal Nehru University, which has only one name. “It is rarely sown after mid-July, so hopefully it will recover is unlikely,” he said, adding that a drop in production is a risk to inflation.

Rice could represent a new challenge in India’s fight against inflation. Consumer prices remained above the 6% tolerance limit set by the Reserve Bank of India this year, prompting a sharp rise in interest rates.

“The lower rice planting area amid rising demand for imports from Bangladesh and other Middle Eastern countries has pushed the prices of rice of different varieties up to 30% since June,” said the economist of the company. Deutsche Bank Kaushik Das. “This poses challenges for food inflation prospects.”

The central bank could further hike funding costs this week as the weakening rupee offsets the impact of falling commodity prices such as fuel and vegetable oils.

According to Sonal Varma, an economist at Nomura Holdings Inc., if geographic disparities in rainfall persist, they could negatively impact agricultural production, negatively impacting economic growth and inflation.

The best customers

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 positive points when it comes to food safety. The United States is poised to deliver a bumper crop of wheat in the coming weeks, while Ukraine has carried its first shipment of wheat since the invasion of Russia.

With India’s paddy rice production poised to decline in several states, the government should consider revising its rice allocation policy for ethanol production, according to Siraj Hussain, former secretary of India’s agriculture ministry. .

India seeks to increase ethanol production by using excess sugar and rice as part of its efforts to reduce fuel costs. Rising food prices after the war in Ukraine increased the risk of hunger and sparked a “food versus fuel” debate.

“Right now, it’s difficult to estimate the exact level of production loss,” Hussain said. But at current prices, there’s hardly any justification for allocating rice for ethanol production, he added.

Image credits: Bloomberg