Rice Prices Set To Rally Further After India's Move To Raise Minimum Support Price

Prices of rice are set to go higher after India decided to increase the minimum support price (MSP) for the staple food grain. Prices of rice are already hovering near 11-year high and the latest move by India may only push prices higher, according to a Reuters report. This is despite the forecast of a near-record output by six leading world rice producers.

And, many countries in Asia and Africa are likely to face a grave shortage of rice amid the soaring rice prices globally.

Meanwhile, impact of El Nino on rainfall has worsened the situation further.
It is worth mentioning that India accounts for over 40% of world's rice exports and any decline in shipment might increase the prices that have already been impacted by Russia-Ukraine war and inconsistent weather conditions.

According to an India Today report, price of Indian rice exports has surged to a five-year high of 9% after an MSP hike of 7%. It is worth noting that export prices in Thailand and Vietnam have surged to over two-year highs since the MSP hike.

As per the India Today report, BV Krishna Rao, president of the Rice Exporters Association (REA) told the news agency that India was the cheapest supplier of rice. "As Indian prices moved up because of the new minimum support price, other suppliers also started raising prices," he added.

According to officials in the industry, supply situation is extremely tight and any decline in India rice exports can lead to a spike in global prices.

The price rise may create challenges in building up stockpiles. As demand from price-sensitive African nations has declined, some Asian buyers, that may include Indonesia and the Philippines, decided to increase their purchases from Vietnam.