The restart of Ukraine's "grain corridor" has just brought a sigh of relief to the global grain market. Wheat and corn prices have fallen from high levels, but now the pressure has come to Indian rice.

India, the world's No. 1 rice exporter, has seen a 13% drop in total rice acreage this year due to a lack of rain in parts of the country, including West Bengal and Uttar Pradesh, which account for a quarter of total rice production, in what could be a three-year record lowest level since.

▌Rice production slashed by 10% due to lack of rain in India

India's rice production is under threat this year due to a lack of rainfall in some areas. As of July 29, the rice sown area in six major rice-producing states including Uttar Pradesh, Bihar, Jharkhand and West Bengal decreased by 3.7 million hectares or 13.3% compared with the same period last year, which is the third most in three years. The lowest level of acreage in India. The reduced area is equivalent to one-tenth of India's national rice-growing area (39.7 million hectares).

The decline in acreage, coupled with strong demand, has pushed up the price of Indian rice recently. Prices of all-category rice have risen 30 percent since the beginning of June, driven by increased demand in Bangladesh, Iran, Iraq and Saudi Arabia, as well as reduced rice acreage in several states. Export prices for rice are expected to rise to $400 a tonne from the current $365 a tonne by September.

India has been the world's largest exporter of rice for the past decade, with exports exceeding 20 million tonnes in 2020 and a record 21 million tonnes in 2021, accounting for 41% of total global exports. Exports in 2022 are expected to be 22 million tons, accounting for 40.5% of total global exports.

Indian rice is sold in more than 150 countries. Bangladesh, China, Nepal and some Middle Eastern countries are the largest customers. The production cut means that the global food crisis will further intensify.

▌India may restrict rice exports

Earlier, Sudhanshu Pandey, a senior official at India's Ministry of Consumer Affairs, Food and Public Distribution, said that as the world's largest rice exporter, India has enough rice stocks, so there are no plans to restrict exports. Because at the time, India's total stock of milled rice and paddy stood at 57.82 million tonnes, more than four times the stock target of 13.54 million tonnes.

Now, traders are concerned that a drop in India's rice production could cause the country to curb exports. This will have profound implications for the billions of people around the world who rely on rice as their staple food. India has previously restricted the export of wheat and sugar to ensure domestic food security and control food prices.

India's market share accounts for more than 40 percent of the global rice trade, the report said. India exports rice to more than 150 countries around the world, and if India reduces its exports, it will exacerbate the global food problem. At the same time, India is also one of the largest rice consumers in the world.

▌The global food crisis may continue into next year

On July 22, the Black Sea grain transportation agreement was signed, and the global grain market is expected to increase its supply improvement. At the beginning of this week, international wheat and corn fell for two consecutive days, with a cumulative decline of nearly 4%. US soybeans fell sharply on Monday, falling by more than 4%, and fell continuously on Tuesday.

Although corn, wheat and other grain futures prices have cooled recently, industry insiders still estimate that the food crisis will be difficult to ease in the short term, and the problem of food shortages may continue into next year.

Eric Hansotia, CEO of AGCO, one of the world's three largest agricultural machinery giants, said on Monday, "There is not enough food in the world, the rest of the year is not enough, and it may even be until next year. This is the case. Unless there is a bumper harvest this year and next, the food gap can be narrowed," he said.

He revealed that the company's current agricultural machinery orders have reached the largest in history, and the agricultural machinery orders in Europe and the United States have increased by 30% and 20% respectively over last year.

A recent agreement between Russia and Ukraine to export grain through the Black Sea may partly ease concerns about food supplies, while concerns over the prospect of a global recession have further weighed on food prices. In the futures market, the price of wheat futures on the Chicago Mercantile Exchange has fallen by about 13% in the past month, returning to the level before the outbreak of the Russian-Ukrainian conflict, and the price of corn has fallen to the lowest level since the year.

Still, the ongoing Russian-Ukrainian conflict, combined with unusually hot and dry weather in parts of Europe and the United States, could still pose a new threat of disruption to food supplies.