Uneven production, thin trading, climate change and increasing demand will keep food security out of balance. Jayan Jose Thomas and B. Satheesha explain in the wake of India’s rice export ban.

The production of cereals – which contributes 44% of the global human calorie intake per day – is unevenly distributed across the world. The Food and Agricultural Organisation (FAO) calculated that Africa, in 2020, had only 7.0% of the worldwide cereal production even while it was home to 17.4% of the world population. At the other end, North America and Europe, together, accounted for 34.3% of the total cereal production in the world, while their combined share in world population was only 14.3%. It appears that there is truth in the widely held view that trade between food surplus and food scarce regions could ensure food security for all and remunerative prices for the farmers.

While rice is the staple food for about half of the world’s population, there are significant challenges to improving access to food globally through trade in rice.

However, there are limits to achieving food security through trade, and this was demonstrated most recently in the developments in international trade in rice. In July 2023, the world’s largest rice exporter, India, banned the export of non-basmati varieties of rice from the country, aiming to strengthen the domestic supply of food grains and to restrain inflation. This led to fears of a global escalation in food prices, especially in Africa, which is a major importer of Indian rice.

While rice is the staple food for about half of the world’s population, there are significant challenges to improving access to food globally through trade in rice.   Rice is a thinly traded commodity in the world market. A few populous Asian countries including China, India, Pakistan, Indonesia, and Bangladesh are the major rice producers. But they are also large consumers of rice, leaving only a little of their production for international trade. In 2020-21, the worldwide export of rice amounted to 52.1m tonnes, which was about 10% of the worldwide production of rice that year (518m tonnes). India exported 21.2m tonnes, out of its total domestic production of 124.4m tonnes of rice. India’s share in global rice exports was 40.7% that year.

Compared to rice producers, there are more countries that produce and export wheat. In 2020-21, worldwide exports of wheat amounted to 189.5m tonnes –  3.6 times the figure for rice. Not only Asia, but also the temperate regions of North America and Europe are significant wheat producers.

And since rice is thinly traded, the rice export market is characterised by a great instability. An increase in export volumes leads to a fall in export prices and vice versa. During the 2007–08 food crisis, a ban on rice exports was imposed by a few exporting countries including Vietnam and India, which led to a rise in rice prices globally. International rice prices began to rise swiftly from April 2020 in the aftermath of Covid-induced disruptions, but they have moved downward  since 2021 after India increased its rice exports (the trend changed again after the country imposed a ban on rice exports in 2023).

Increases in food prices have benefitted only a few traders and rich farmers, while the poor, who are net purchasers of food, have been hit hard.

Instability in prices is not limited to rice alone. When the Agreement on Agriculture (AoA) was incorporated into the World Trade Organisation (WTO) in 2005, the promise was to establish “a fair and equitable market oriented agriculture trading system.” Several developing countries, including India, had liberalised agricultural trade by the early 2000s. However, the two decades since 2000 have been marked by sharp increases and high volatility in food prices in these countries. The increases in food prices have benefitted only a few traders and rich farmers, while the poor, who are net purchasers of food, have been hit hard. Professor of economics at the University of Massachusetts Amherst, USA, Professor Jayati Ghosh, notes that the food price increases have been driven by a few, large multinational companies, that control the global grain market as an oligopoly.

Being a dominant player, India’s moves in international rice trade can have significant impacts on global food prices. Countries in Africa, including Benin, Côte d’Ivoire, Guinea, Madagascar and Kenya, purchased about half of the rice exported by India in 2022-23. Being a food deficit region, Africa will be affected adversely by India’s rice export ban and also by the disruptions in international trade in food grains caused due to the hostilities between Russia and Ukraine.

Mainly on account of El Niño’s drying effects, the global rice production will increase only by 0.1% in 2023-2024 over the previous year.

Meanwhile there are concerns about the future growth of rice production, especially in the wake of unpredictable weather patterns and climate change in South, and Southeast Asia, which are home to some of the major rice producers. Scientists have warned that one implication of these weather pattern changes is that El Niño, a climate pattern related to unusual warming of surface waters in the Eastern Pacific ocean, will be strengthened in the coming years. The US Department of Agriculture predicts that, mainly on account of El Niño’s drying effects, the global rice production will increase only by 0.1% in 2023-2024 over the previous year. This is likely to result in higher rice prices in the future.

A key factor related to exports is the domestic demand for food grains in the exporting countries. Even while it exports food grain, the domestic per capita availability of food grain is relatively low in India – 99 kg for rice and 93 kg for wheat, which is much lower than the corresponding figures for China (178 kg and 192 kg respectively, in 2020-21). The average daily per capita intake of food is 2599 kilocalories in India compared to 3337 kilocalories in China (in 2020). The low levels of per capita calorie intake in India – and millions of Indians suffering from food shortage and undernutrition – are associated with  low incomes and purchasing power among the majority of the country’s population. It is striking that China exports very little of rice or wheat, despite being the world’s largest producer of both cereals, because of the high domestic demand for cereals in that country.

It is unlikely that trade will provide a lasting remedy to the problem of food insecurity, especially for Africa.

The domestic demand for food grain is likely to strengthen in India in the coming months and years, on account of higher household incomes and the extension of a free food grain scheme instituted by the government – which benefits more than 800m across the country – until 2029. This is possibly one of the reasons behind the ban on rice exports imposed by the Indian government. The increase in domestic demand in other rice producing Asian countries as well, including Vietnam, Pakistan, Thailand and Bangladesh, reduces the prospects for future growth of rice exports.

It is unlikely that trade will provide a lasting remedy to the problem of food insecurity, especially for Africa. The developing world including India, other Asian countries and Africa must institute public investments and policies to enhance agricultural yields, boost food production, and improve food security. It may be noted that the impressive expansion in the domestic production of rice and wheat in India since the mid-2000s has been on the back of a policy of public procurement of food grains from farmers at minimum support prices fixed by the official agencies. To attain a hunger-free world, policy attention must also be directed to raising the incomes and purchasing power of the masses.

Reference

Thomas, Jayan Jose and Satheesha, B (2024) ‘Trade and Food Security: In the Context of India’s Rice Exports’, Review of Agrarian Studies, forthcoming.

 

Jayan Jose Thomas

Jayan is a Professor of Economics at the Indian Institute of Technology Delhi. His research deals with macroeconomic issues of developing countries, mainly labour and industrialization.  He had also been …

Read More »

B. Satheesha

Satheesha is a senior research associate at the Gokhale Institute of Politics and Economics (GIPE). His research primarily focuses on labour market, agriculture and rural development, poverty, and inequality. He …

Read More »

Leave a Reply

Your email address will not be published. Required fields are marked *