- At Fitch Solutions, we maintain our forecast for India’s rice production in 2022/23 and expect output to increase 0.2% y-o-y to 129.3mn tonnes, the country’s seventh successive record rice crop.
- Our view is that India is unlikely to impose trade restrictions on rice while domestic prices remain subdued and stockpiles are high, the recent application of protectionist measures to both wheat and sugar sales notwithstanding.
- We stress that a move to restrict the export of rice from India would have a severely detrimental impact on regional food security as well as exacerbating global grain price inflation, and thus market conditions to that end must be monitored closely.
At Fitch Solutions, we maintain our forecast for India’s rice production in 2022/23 and expect output to increase 0.2% y-o-y to 129.3mn tonnes, the country’s seventh successive record rice crop. In the seven-year period spanning 2015/16 and our 2022/23 forecast, India’s rice output will have grown at an average annual rate of 3.6%, with almost two-thirds of the 24.9mn production growth in this period accounted for by rising crop yields, from 3.60 to a forecasted 4.15 tonnes per hectare. India remains the second largest rice producer in the world, constituting one-quarter of global output in 2022/23, but its output has grown faster than that of China, the largest producer, where growth since 2015/16 rests at just 0.1% per annum.
Output Growth Set to Continue
India Rice Production Forecast (mn tonnes)
The notable rice yield deficit between India and other regional producers, equal to 44.8% and 71.1% between Vietnam and China respectively, indicates that significant capacity for further output growth, driven by productivity catch-up, exists in India. The principal obstacle preventing the narrowing of this yield gap has been, and indeed remains, the low level of irrigation in India, with close to 40% of its total rice crop, concentrated in northern and western states, unirrigated (or, rainfed) and thus dependent on the timing and distribution of the annual monsoon rainfall. The kharif rice crop, which makes up the majority of India’s aggregate rice output, is planted between May and mid-August each year and its development is determined by the level of rainfall during the transplanting and early growth phases, during which significant volumes of water are required. On May 29 2022, the annual Indian monsoon reached the shore of Kerala, in the country’s south, two days of ahead of time with average monsoon rains forecast for the year, auguring favourable conditions for rice production.
India Yield Shortfall
Rice Yield (tonnes/hectare)
Our view is that India is unlikely to impose trade restrictions on rice while domestic prices remain subdued and stockpiles are high, the recent application of protectionist measures to both wheat and sugar notwithstanding. On May 14 2022, the Indian government introduced a ban on wheat exports in an attempt to allay fears of reduced domestic output in the face of a punishing heatwave, to calm rising food prices, and to maintain the country’s food security. This decision was followed up on May 25 2022 with the imposition of a restriction on sugar exports, limiting foreign sales between June 1 and October 31 2022 to 10mn tonnes.
Prices Subdued in 2022
India Rice Price (25% Broken, Export, USD/tonne)
While attention has now focused on the fate of India’s rice trade, we at Fitch Solutions do not anticipate the Indian government acting to curtail exports in the short term as inventories are high and local prices remain below the government-set minimum support price (MSP). However, should one or both of these two bulwarks against rice price inflation be seen to be threatened, the likelihood of a partial or full export restriction would increase. In this regard, the background to the Indian ban on wheat exports is instructive: reduced domestic harvest expectations, due to a sustained heatwave, exacerbated global grain price inflation and pushed the price of wheat on Indian markets above the MSP, leading to a large fall in government wheat procurement, tight supply conditions, and, ultimately, the decision to restrict trade. However, in 2022 to date, the traded price of rice has remained subdued amid expectations of a good harvest and ample stockpiles.
India Year-Ending Rice Stocks (mn tonnes)
We stress that a move to restrict the export of rice from India would have a severely detrimental impact on regional food security as well as exacerbating global grain price inflation, and thus market conditions to that end must be monitored closely. In 2021/22, India accounted for 40% of global rice exports and supplied 41, 21, and 7 countries, predominantly in Asia and Africa, with at least 50%, 80%, and 95% of their imports of the grain by quantity respectively. The importance of ample rice supplies to Asia specifically cannot be understated, with close to 90% of global output produced and consumed within the region, and the relative insulation of its price to the disruptions caused by the Russia-Ukraine conflict, which have roiled markets for alternative grains, has served as a brake on rising food insecurity. In this regard, we highlight that India’s share in the global rice export market, of about two-fifths, exceeds that held by Russia and Ukraine in the global wheat export market, of close to one-third, when stressing the hugely destabilising impact that an Indian export ban would have on food price inflation and international grain supplies.
Exports by Destination
India Rice Export Partners (% of Total Quantity Exported)
Share of India in Partner's Imports
India is well placed to record rice export sales in excess of 20.0mn tonnes for the third consecutive marketing year (MY), starting in October, made possible by consistent production growth and competitive pricing. Since January 2020, the export price of Indian rice has averaged 358 USD/tonne, and thus traded at a meaningful discount to both Thai and Vietnamese alternatives, priced at 460 USD/tonne and 415 USD/tonne over the same period respectively. In May 2020, Thai Prime Minister Prayuth Chan-o-cha suggested that Thailand and Vietnam ought to coordinate on increasing traded rice prices but such a strategy would prove difficult to implement due to the short time available between the harvest of rice and the worsening of its quality. If implemented, it would also be to the competitive benefit of Indian rice exporters.
Rice Exports on the Rise
India Rice Exports (mn tonnes)
Fitch Solutions India Rice Forecast
|India||Rice production, '000 tonnes||109,700.0||112,800.0||116,480.0||118,870.0||124,368.0||129,000.0||129,258.0||129,904.3||130,423.9||131,076.0|
|India||Rice consumption, '000 tonnes||95,700.0||98,669.0||99,160.0||101,950.0||101,069.0||103,090.4||104,533.6||105,997.1||107,481.1||108,985.8|
|India||Rice production balance, '000 tonnes||14,000.0||14,131.0||17,320.0||16,920.0||23,299.0||25,909.6||24,724.4||23,907.2||22,942.8||22,090.2|
|India||Rice self sufficiency, %||114.6||114.3||117.5||116.6||123.1||125.1||123.7||122.6||121.3||120.3|
This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2021 Fitch Solutions Group Limited. © Fitch Solutions Group Limited All rights reserved. 30 North Colonnade, London E14 5GN, UK.