Author: Alvaro Durand-Morat

On September 28, India lifted its export ban on non-basmati white rice and replaced it with a minimum export price (MEP) policy of $490/metric ton. On October 20, India announced the removal of the MEP policy on non-basmati white rice and the removal of export duties on other rice products (e.g., parboiled, husked, and paddy rice), effectively freeing rice exports. While this measure was expected anytime and the global rice market was already factoring in the change to some extent, the announcement is creating shockwaves throughout the global rice market.

India implemented the export ban on July 20^th, 2023 (see https://southernagtoday.org/2023/07/27/shaking-the-global-rice-market-india-bans-exports-of-white-non-basmati-rice/) amid fears of a short rice crop due to the projected dry Monsoon that never materialized. India harvested a record rice crop (137.8 million metric tons) in 2023/24, but the export ban remained in place. Fast-forwarding to the current year 2024/25, the weather has been beneficial, and India is projected to harvest a new record crop (estimated at 142 million metric tons in October according to USDA) and carry record-high stocks. In summary, India’s production performance has been outstanding, which undermined the rationale for keeping the export ban for so long. 

Since late September when India started easing exports, Asian rice prices have been under downward pressure despite the strong import demand, primarily from Indonesia and the Philippines. For instance, the export price of Thai 5% rice dropped below $500/metric ton in mid-October for the first time since July 2023 (Creed Rice Market Report, 2024; USDA, 2024a), while that of Pakistani 5% rice dropped more drastically as Pakistan competes more directly with India in many African markets. The latest Creed Rice Market Report (November 6^th) suggests India’s export price for non-basmati white 5% rice is around $465/metric ton.

In contrast, rice prices in the Western hemisphere are still at a much higher level than those in Asia, and the downward pressure has not been felt so hard, at least not yet. For example, the average export price for Southern 4% long-grain rice average $779/metric ton in 2023/24 and has hovered around $800/metric ton since August. Export prices out of Mercosur have also fluctuated between $770-790/metric ton in the last few weeks. While Western hemisphere long-grain rice has historically enjoyed a price premium relative to Asian long-grain rice, we should expect an increasing downward price pressure in the coming weeks and months as India’s rice harvest and the Mercosur’s rice crop advances.

The million-dollar question for the U.S. rice industry is how will prices adjust this coming year, and the answer is: it depends. First, it will depend on the (most likely) downward adjustment in Asian export prices, which in turn depends (among other things) on how much rice India exports. A quick analysis using the Arkansas Global Rice Model (AGRM) and assuming India exports according to USDA projections in October (21 million metric tons) bring prices to $450/metric ton. However, if India decides to liquidate some stocks as well further increasing exports, prices may drop even further. Second, it will depend on the level of market integration with Asia. While historically Asian rice has not been prominent in the Western hemisphere, its presence is growing. The more market integration, the more pressure we should expect to receive, and an increasing price gap between Asian and Western Hemisphere rice could fuel market integration. Third, it will depend on the rice crop in Mercosur (South American countries that compete with U.S. long grain rice). USDA projects a slight increase in planted area relative to last year, which could result in more competition in core U.S. export markets.

Finally, it is important to discuss how much room there is for price adjustments and profitability. The November WASDE report (USDA, 2024b) maintains long-grain farm prices unchanged at $14.50/hundredweight ($319/metric ton). Using that farm-price as a reference and the University of Arkansas Division of Agriculture 2025 Rice Enterprise Budgets (Figure 1), we estimate the average net returns to range from $22.25 to $103.28/acre for the different rice production systems, significantly lower than last year’s net returns, which ranged from $97.50 to $153.70/acre. We estimate the 2025 breakeven prices to range from $13.26 to $14.22/hundredweight (cwt) across production systems. The downward pressure on prices due to India’s liberalization of rice exports could push farm prices further down in the coming months, which could further decrease the economic returns and affect the 2025 rice planting intentions.                      

Figure 1. Arkansas: Projected 2025 Net returns and Breakeven Price.

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References

Creed Rice Market Report. 2024. Several issues. Available at https://www.riceonline.com/

University of Arkansas Division of Agriculture. 2024. 2025 Arkansas Crop Enterprise Budgets. Available at https://www.uaex.uada.edu/farm-ranch/economics-marketing/farm-planning/budgets/crop-budgets.aspx

USDA. 2024a. Rice Outlook. October 2024. Available at https://www.ers.usda.gov/publications/pub-details/?pubid=110218

USDA. 2024b. WASDE Report. November 2024. Available at https://www.usda.gov/oce/commodity/wasde

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Durand-Morat, Alvaro. “What to Expect from India’s Removal of the Export Ban on White Non-Basmati Rice.” Southern Ag Today 4(46.4). November 14, 2024. Permalink

On July 20^th, 2023, the Government of India announced the prohibition of exports of white non-basmati rice (semi-milled or whole milled, whether or not polished or glazed: other; HS 10063090) effective immediately. This measure follows the implementation of a 20% export tariff on non-basmati white rice last September. Exports of basmati (aromatic) and parboiled rice are not affected.

The measure is expected to have a significant impact on the global rice market given that India is the largest exporter of rice. In the last two marketing years (2021/22 and 2022/23) India exported an average of 21.8 million metric tons or almost 40% of global rice exports. Figure 1 shows India’s rice export breakdown by category. The export ban affects 5.8 million metric tons or 27% of the rice exported by India, most of which is exported to Africa. The countries most directly affected by the measure are Madagascar, Benin, and Nepal because India’s white non-basmati rice is the bulk of their imports. At this point, it is safe to say no other single country (except maybe China?) could step up and supply that volume to balance the market. 

Figure 1. Share of India’s rice exports in the last two marketing years by category.

The export restriction comes on top of rising global rice prices. According to FAO, since June 2022 the all rice price index and the Indica (long-grain) index, which corresponds to white non-basmati rice, increased 14% and 16%, respectively. Export quotes for India’s Indica rice increased sharply from U.S. $ 355/ton a year ago to U.S. $495/ton in mid-July (Creed Rice Market Report). 

The export ban is expected to put upward pressure on rice prices, which can benefit the U.S. long-grain rice industry. Given current market conditions, U.S. long-grain rice is not competitive vis-à-vis Asian rice, the export ban could help reduce the price gap and increase the opportunities for U.S. rice. Nevertheless, the main challenge for the southern U.S. rice industry remains Mercosur, primarily Brazil.

Finally, it is important to acknowledge that the export ban could have severe food security implications, primarily among segments of the population that rely on rice as an affordable source of calories. This potential consequence of the measure is likely to catch the attention of the broader public in the coming months.     

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Durand-Morat, Alvaro. “Shaking the Global Rice Market: India Bans Exports of White Non-Basmati Rice.” Southern Ag Today 3(30.4). July 27, 2023. Permalink

According to USDA 2023 Prospective Plantings report, the long-grain rice planted area is projected at 1.96 million acres, a 9% increase relative to 2022, but still slightly below the 5-year average (2.0 million acres). At trend yields of 7,299 pounds per acre, we could expect a 14.6 million hundredweight (cwt) or 11.4% increase in production relative to 2022.

With the expected increase in production, the pressure will be on exports to perform well and help keep market prices stable. While the share of long-grain exports to total use has been decreasing steadily since 2015, exports still accounted for between 41% and 48% of total long-grain rice use during this period^[1]. The short 2022 U.S. long-grain crop (on top of an already short 2021 crop) puts extra pressure on farm prices, which have reached record levels in 2022/23 (USDA estimates an average farm price of $16.90/cwt).

So far, 8 months into the 2022/23 marketing year, export performance has been lagging with only 34.9 million cwt (rough basis) of long-grain rice exported, compared to an average 52.4 million cwt during the same period in the last 5 years. Paddy rice exports are down almost half relative to last year, mostly due to a sharp 71% decrease in exports to Mexico and a 38% decrease in exports to Central America (Figure 1), where Mercosur (primarily Brazil) has displaced the U.S. as the top supplier. Exports of milled rice are showing a good performance despite the lack of price competitiveness, which indicates the importance of other factors aside from price. For example, the U.S. negotiated 250 thousand metric tons of milled rice exports to Iraq, a market in which U.S. rice is clearly not price competitive.

The expectation is that a larger 2023 U.S. crop and the smaller 2022 Brazilian crop (7.9% smaller than in 2021) could provide the incentives for the U.S. to reclaim at least part of the Mexican and Central American markets. However, other aspects related to (1) milling and culinary quality differences vis-à-vis Mercosur rice, and (2) the prospects of policy changes in Central America aimed at extending trade preferences to competing countries similar to those given to the U.S. under CAFTA-DR, may hinder the prospects for U.S. rice in these Latin American markets.

Figure 1. Exports of U.S. long-grain rice to Mexico and Central America in the first eight months of the last seven marketing years (rice marketing year: August-July).

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^[1] USDA includes imports of fragrant (jasmine and basmati) rice in the rice supply and use estimations, but they are removed in this analysis as fragrant rice is a different market segment than long-grain rice.

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Durand-Morat, Alvaro. “Global Market Prospects for U.S. Long-Grain Rice for the Upcoming Marketing Year.” Southern Ag Today 3(16.4). April 20, 2023. Permalink

The U.S. has consistently ranked among the top-5 rice exporters in the world. However, since hitting a record 3.98 million metric tons (mmt) in 2002, U.S. rice exports have shown a downward trend, reaching 2.98 mmt in the marketing year 2020/21. The decrease in US exports contrasts with a growing global rice market and results in a significant drop in the US share in global rice exports in the last two decades. The decrease in U.S. exports is exclusively a result of a drop in long-grain rice exports since exports of medium- and short-grain rice have shown a positive trend. Long-grain rice is the main type of rice produced in the Mid-South, accounting for over 91% of the volume of production. 

In the last 20 years, exports of long-grain rice to North America and the Caribbean, the two largest market destinations, have grown marginally (less than 1% a year), while those to Central America and the Middle East have decreased moderately (between 1 and 2% a year on average). Exports to Europe have not recovered since the GM-contamination case in the mid-2000s. Exports to Mexico, the largest market for US long-grain rice accounting for a quarter of total exports in the period 2018-2020, show almost no growth since the early 2000s, and more recently are in a downward trend as competition from other suppliers, primarily Mercosur, grow. Haiti remains a core and growing market for US rice, but one plagued with risks and uncertainty. Competition in Central America, primarily from Mercosur, is eroding the market share of US rice despite its preferential access under DR-CAFTA. 

Efforts are being made to improve the competitiveness of US rice, particularly when it comes to rice quality. The US was once regarded as the golden standard for long-grain rice quality, but many will argue that is a thing of the past. The blame goes far and wide as to why the quality of US long-grain rice has diminished, but what matters is that the industry is taking steps to address the issue. The US exports around half of its rice crop every year, so working on regaining competitiveness in the global market is of utmost importance.   

Durand-Morat, Alvaro. “U.S. Long-Grain Rice Faces Growing Challenges Overseas“. Southern Ag Today 2(21.4). May 19, 2022. Permalink