Food Inflation -- The Rice Factor

Food Inflation (II) – The Rice Factor

Food Inflation -- The Rice Factor

Farmers are a major constituency for the government and they remain in protest mode asking for a better deal from the state. In this situation it will not be in order to expect import duty to be lowered, till at least parliamentary elections are over and a new government is formed in June.

At the same time, the government being engaged in taming food inflation is unlikely to signal resumption of wheat exports, a ban on which was put in May 2022. Wheat exports in 2021-22 (April to March) exceeded the target of 7m tonnes by 850,000 tonnes. Soon thereafter came the ban.

Deficiencies in crop estimates – in the present case it is over wheat crop of the 2023-24 season, the harvesting of which has begun – make taking decisions about food related trade policies difficult, says Dhanuka. This, however, should not be the case any longer with monitoring of crops from sowing to their different stages of growth being possible using satellites and drones. For the same reason of data related confusion, India’s neighbour Bangladesh with a population of 174.25m was not sure for a long time whether the production of rice this season has been enough to take care of domestic demand.

The question remains if the country is harvesting a lot more rice than local requirements then why should the cereal price be on an upswing, especially during the Ramadan month when most Muslims observe strict fasting from dawn to sunset.

Bangladesh Rice Research Institute (BRRI), an agriculture ministry outfit, has forecast a total of 41.2 million tonnes of rice is likely to be produced this year, including 20.9m tonnes of boro, 3m tonnes of aush and 17m tonnes of aman. Such a level of production should leave a surplus of 5m to 6m tonnes after meeting domestic demand of around 35m tonnes. The United States Department of Agriculture (USDA), however, says Bangladesh rice production of 36.3m tonnes will fall short of likely local consumption of 37.6m tonnes, leaving a deficit of 1.3m tonnes.

ALSO READ: Food Inflation – Grains of truth (I)

Without going into the merits of which of the two agencies, BRRI or USDA, has done a better job of estimating 2023-24 rice output, the worrying development is rising rice prices. What is to be said in favour of Dhaka is that it has been quick in reworking the import duty and asking private agencies to import the sanctioned volume of grain. Moreover, it has begun a dialogue with New Delhi for import of rice and wheat and also three other commodities, namely, onion, ginger and garlic that hopefully will soon lead to the signing of memorandum of understanding. Though there is a ban on export of rice and wheat, New Delhi has supplied rice, wheat and onion to countries in the neighbourhood and also to “key partners” such as the UAE, Indonesia and Vietnam on a case to case basis.

The unusual dry weather is making Bangladesh, which is the world’s third largest producer of rice after China and India, harvest a crop that will fall short of local demand. Imports, therefore, is unavoidable. Recent price inflation notwithstanding, the country highly vulnerable to flooding has moved from recurrent food shortages to self-sufficiency. The flooding risk is because of its location in the Bengal delta and its low-lying flat topography, which is further compounded by several factors linked to climate change. Rising frequency of extreme precipitation events more erratic rainfall has made Bangladesh’s pursuit of green revolution highly challenging.

The country’s agricultural research organisations have, however, been able to develop high-yielding varieties of rice that will grow in conditions of salinity, submergence and extreme temperature. Observers of Bangladeshi economy attribute breakthroughs to other factors like availability of locally produced quality seeds and nutrients and an efficient extension programme designed to arm farmers, almost entirely small owning less than 3 hectares with ideal farming practices. The country in the meantime has graduated from “green revolution to gene revolution.” Once again thanks to research successes in developing HYV seeds, Bangladesh is also producing over a million tonnes of wheat.

FAO says in a report that in spite of the 2023-24 season having suffered La Nina related weather setbacks, “improvements in the relative profitability of rice cultivation have stimulated expansions in main-crop plantings in Asia, Africa and Northern America should help offset the negative impacts of the weather disruptions.” Based on this premise, FAO has forecast world rice production to rise 0.8% from the 2022-23 reduced harvest to 523.9m tonnes in 2023-24 season on a milled basis.

However, price rises both in domestic and international prices that will keep in check use of the grain both for animal feed and human consumption is to arrest rice use at 522m tonnes. International trade in rice in 2024 is forecast to remain close to the 2023 reduced level at 52.8m tonnes. Till there is a new government in June, India will not consider lifting ban on rice exports. But according to FAO: “Apart from Brazil, Uruguay and Viet Nam, most exporters are expected to raise their shipments” compensating for squeeze in supplies from India. Global rice stocks will be up to a record high of 198.9m tonnes. Thailand, a major producer and exporter of rice, is, however, to see fall in milled production to 20m tonnes in the 2023-24 marketing year from 20.909m tonnes a year earlier.

In the family of rice consisting of quite a few varieties, the long slender-grain aromatic basmati is the niche one that is sold at a high premium over the normal grain. Basmati rice too comes in several varieties. Grown principally in India and Pakistan and sold in the world market by them, basmati has got geographical indication (GI) tag, speaking for its exclusivity and integrity. Grown in the Indian subcontinent’s Himalayan region benefiting from its unique climatic and soil condition, distinctive qualities of the aromatic rice are gained by finely tuned cultivation and processing practices.

(This is the second article of a three-part series on the subject)

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