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For now, the rise in global prices has not yet reflected into local rice prices across South Africa. But that could change, writes Thabile Nkunjana.
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Following India's embargo on non-basmati rice exports in July 2023, global rice export prices have risen past those seen during the Covid-19 lockdowns in 2020.
The International Grain Council's global rice index was 40% higher year on year on 8 August and export prices from key rice suppliers globally are well at levels last seen in March 2008.
During the Covid-19 lockdown, rice prices escalated due to labour issues from key exporters while in 2008, the world commodity prices were devastated by the world financial crises.
The embargo by India meant that countries needed to look for other alternative rice suppliers to fill the gap left by rice imports from India. Countries experienced this in the instance of wheat when Russia invaded Ukraine in February 2022, as they had to replace Black Sea wheat supplies at a higher cost.
As with wheat, replacing rice supplies would be difficult due to the concentration of rice exports in Asian countries. According to rankings, India is the world's leading rice exporter, accounting for around 41% of worldwide exports, followed by Thailand (13%), Vietnam (13%), Pakistan (8%), and the US (5%).
As a result of India's ban on rice exports, global fears about rice supplies have grown, and rice prices have risen. These developments are worrying, especially for countries that consume rice in relatively big quantities while being unable to produce it domestically – such as South Africa, its neighbours, and many other African and Asian countries.
Export prices for a ton of 100 grade B white rice from Thailand have increased by 20% or US$103 (R1 941) from US$520 on 17 July to US$623 on 8 August 2023. For the same period, a ton of 5% broken rice from Vietnam has increased by 15% or US$78 (R1 467).
The situation could get worse as far as rice prices are concerned, should other rice-exporting countries begin to impose trade restrictions, especially when markets are this vulnerable. The United Arab Emirates, which relies on India's rice supplies for its domestic rice consumption and re-exports is reported to have temporarily banned rice exports for four months as of 28 July 2023.
However, for the time being, Thai officials have confirmed that rice exports to the global market will continue as its producers profit from India's prohibition. In addition, India is said to be willing to hold government-to-government negotiations with countries in need of urgent rice supply.
Depending on how bad the situation develops in the next weeks throughout world grain supply, particularly rice and wheat, some countries may require government-to-government talks to assist vulnerable consumers, but we have not reached that stage yet, and South Africa is unlikely to. But, if the situation deteriorates to that point, South Africa is a BRICS member, along with India, and the two countries have historically strong trade ties.
Domestically, rice retail prices remain marginally lower at this stage. A 2kg of rice nationwide was 1.3% lower year on year end of June 2023, 1.6% lower when compared to June 2021, and 8.4% lower when compared to June 2020.
This generally means that for now, the rise in global prices have not yet reflected into local prices across South Africa. Retail prices for a 2kg bag of rice are currently at R39, and the next CPI data to be released by Statistics South Africa in the next few days for July 2023 will show how things are progressing.
However, it is important to recognise that there is a lag period between commodities prices and domestic prices. As a result, the current scenario on local rice prices may fluctuate depending on the global situation.
This is why, in comparison to international markets, local prices can take longer to return to long-term balance.
Current events, on the other hand, need close monitoring of the entire situation as it develops, including developments from the Black Sea on grains carried from that region to the rest of the world.
Other grain supply such as maize or wheat should continue to support commodity prices.
Thabile Nkunjana is an agricultural economist in the Agro-Food Chains Markets and Economic Research Division of the National Agricultural Marketing Council. News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.
