India reduces exports, and rice prices should rise for consumers – 24/07/2023 – Vaivém

Indian restrictions on rice exports and the war between Russia and Ukraine affect the international cereal market, with an impact on consumer prices. The good news is that Brazil should expand its production area.

After many years losing planting area to soybeans, rice may recover up to 150,000 hectares in Brazilian crops for the 2023/24 harvest, according to Vlamir Brandalizze, from Brandalizze Consulting.

“The increase in area will increase Brazilian production by up to 1 million tons, which gives greater impetus to exports and domestic supply”, he says.

The limitation of Indian exports comes in a period of lower supply of rice in several of the main producing regions, due to the recent climatic effects.

India, China, Thailand, Vietnam and Mercosur countries —these traditional suppliers of Brazil— reduced production in the 2022/23 harvest. As a result, the global supply of the cereal will be smaller.

Brandalizze Consulting estimates a world production of 510 million tons, below the demand of 525 million. This deficit of 15 million tons occurs after an offer lower than consumption also in the previous harvest.

The interference of the war between Russia and Ukraine occurs because rice and wheat are the most consumed cereals, and the reduction in supply of one drives the prices of the other. With supply restrictions from exporting countries, prices are heating up even more, according to Brandalizze.

The reduction in wheat production in Ukraine and the end of the export corridor between the two countries through the Black Sea, broken by Russia, further accelerate the demand for rice.

For Brandalizze, both India and China will affect the world market in this harvest. The Indians are the main exporters and have 40% of the international rice market.

The Chinese, although they are the world’s biggest producers of the cereal, are also the biggest consumers and will import close to 10 million tons, heating up the world market even more.

Production in China, affected by the climate, should be between 225 million and 230 million tons of the base product, but consumption will reach 240 million, says the consultant.

India, with a production of 130 million tons, even with the reduction in exports, should clear its internal stocks. The Indian government has imposed restrictions on foreign rice sales to prevent new internal price increases.

This change in the world scenario opens the door to an increase in Brazilian exports, says Brandalizze. He estimates that the country places up to 1.7 million tons of rice on the foreign market. Until June, the volume was 1 million.

The international prices of cereal rise, and the cost will reach the plate of Brazilians, as well as consumers in other countries. For the consultant, 2024 will be a period of firmer prices for both rice and wheat.

The price of rice in Mercosur, based on the product consumed in Brazil, is between US$ 510 and US$ 560 per ton for processed cereal. In Thailand, the world’s second largest exporter and which accounts for 15% of international sales, a ton already reaches US$ 600.

“After the restrictions in India, exporters disappeared”, says Brandalizze. To him, Vietnam, Thailand and Pakistan should increase their participation in the international market, including in the Middle East and Africa.

Brazil will also gain a greater space on the international stage. The increase in rice production, therefore, is important for the country to have strength in the foreign market, without leaving the domestic market short, says Brandalizze.

The consultant estimates a 10% increase in production for the next Brazilian harvest. The price of cereal is favorable, and that of inputs has dropped in recent months. “It will be an opportunity for the producer”, he says.

Brazilian rice production reached the lowest level of the last 25 years. According to Conab (National Supply Company), Brazil produced 10 million tons in 2022/23, should consume 10.3 million, import 1.3 million and export 1.5 million.

The price of a bag of cereal in the husk rose again and closed this Monday (24) at R$ 85.37 in Rio Grande do Sul. A year ago it was at R$ 77.21, according to monitoring by Cepea (Center for Advanced Studies in Applied Economics).

Wheat soars after new Russian attack

After withdrawing from the agreement that allowed Ukraine to export grains through the Black Sea, Russia attacked, this Monday (24), Ukrainian port structures for the exit of grains through the Danube River.

The aim is to strangle Ukrainians’ grain exports to Europe, one of Ukraine’s main markets after Russia’s invasion of Ukraine’s territory. The reaction from the commodity market was immediate.

The September trade contract for wheat, one of Ukraine’s top exports, rose to $7.68 a bushel (27.2 kg) on ​​the Chicago Board of Trade, up 8.6%. The first contract for corn, another key item in Ukraine’s grain exports, rose to $5.60, up 6.4%.

Even soybeans, due to the difficulties that the Ukrainians will have with exports of sunflower and derivatives, rose, 1.7%, in the September contract.