India becomes big exporter due to cheaper rice varieties

Five months after lifting a ban on exports of cheaper varieties of rice, India has emerged as one of the world’s top rice exporters. That has helped stabilize prices around the world, even as the cost goes up in traditional exporting nations like Thailand.

Scores of Indian rice traders have returned from a recent Grains Conference in Dubai after discussing lucrative deals.

The head of the All India Rice Exporters Association, Vijay Setia, says business will be brisk in the coming months.

“Feeling was bullish. Demand from Iran, Iraq and the entire Middle East was big. African customers were there because of good quality and the lower price,” said Setia.

The reason: India is providing customers with a cheaper alternative to rice from top exporters like Thailand. Rice became more expensive in Thailand after floods damaged last year’s crop and the government introduced a scheme to guarantee how much farmers are paid.

The situation in India is dramatically different. There are huge stockpiles after a series of bumper rice crops, leading to a nearly 25 percent fall in paddy prices in local markets. The government responded in September by lifting a four-year-old ban on exports of lower-priced varieties of rice. India has always exported its expensive basmati rice, but exports of other varieties were suspended in 2008 after global food prices climbed steeply.

Samarendu Mohanty, chief economist at the International Rice Research Institute in the Philippines, says India’s return to the global rice market in September prevented a spike in international prices.

“India came as a savior. The timing was so perfect because Thailand was implementing in the same month their rice mortgage program where they increased their domestic price by nearly 50 percent. It pretty much boiled down to if Thai increased their rice by 50 percent, then global rice price also goes up accordingly. But that did not happen because of India,” said Mohanty.

Mohanty estimates that a ton of Indian rice is currently about $100 cheaper than comparable varieties from other countries. From October to January, India shipped out 2.3 million tons of rice – even more than Thailand – as the Indian rice was sought by customers in several countries.

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