Traders step up forward Indian rice purchases
MUMBAI: The government’s surprise ban on wheat exports has prompted rice traders to increase purchases and place unusual orders for longer-dated deliveries, fearing the world’s top rice exporter may restrict those shipments as well, four exporters told Reuters.
In the last two weeks, traders have signed contracts to export 1 million tonnes of rice for shipments from June through September and are opening letters of credit (LCs) quickly after signing deals to ensure the contracted quantity will be sent even if India restricts exports, the people said.
Those forward purchases come on top of roughly 9.6 million tonnes of rice already shipped out of India this year— in line with record 2021 shipments—and may reduce the amount of grain available for other buyers during the coming months as loading schedules fill. “International traders prebooked for the next three to four months and everybody opened LCs to ensure business continuity,” said Himanshu Agarwal, executive director at Satyam Balajee, India’s biggest rice exporter.
Normally traders sign deals for the current and next month.
Aggressive purchases from India could also reduce demand for rice from Vietnam and Thailand, the world’s second and third-biggest exporters respectively, which are struggling to compete on price.
The government last month banned wheat exports in a surprise move, days after saying it was targeting record shipments this year. It also put a cap on sugar exports.
India is not a top global wheat exporter, but it is the world’s second-biggest sugar exporter behind Brazil.
Those export curbs led to speculation that the government could also cap rice shipments, though government officials said India does not plan to because it has sufficient rice stocks and local prices are lower than state-set support prices.
India’s wheat ban trapped a large quantity of the grain at ports because New Delhi only allowed contracts backed by LCs to depart.
“Normally people open LCs while they nominate a vessel. This time they opened LCs for all rice contracts that were pending, so in case there is a ban on exports, at least the contracted quantity is shipped out,” Agarwal said.
India accounts for more than 40% of global rice trade.
Overseas buyers are looking for Indian rice because it is far cheaper than rivals, said B.V. Krishna Rao, president of the All India Rice Exporters Association.
Indian 5% broken white rice is offered between $330 to $340 per tonne on a free-on-board (FOB) basis, significantly lower than Thailand’s $455 to $460 a tonne and Vietnam’s $420 to $425, dealers said.
India exported a record 21.5 million tonnes of rice in 2021, compared with combined exports of 12.4 million tonnes by Vietnam and Thailand.