Another Price Hike! We're all on this together
Since the last few months, food prices have been on the rise. Food ranging from wheat to other grains, meat and oil are continuously increasing. Increase in cost of energy, fertilizer and Russia-Ukraine war are some of the causes of the rise. Both Russia and Ukraine were the major exporter of wheat before the war. Since the war, wheat prices have increased by 50% due to disruption in wheat export from both countries. Increase in the price of wheat has caused an increase in the price of rice. Food Price Index of The United Nations’ Food and Agriculture Organization shows that the international price of rice is continuously increasing since the last 5 months. It seems that the price of rice will keep on increasing due to many reasons.
Firstly, Ukraine along with Russia contributes around 29% of the world wheat export. The war in the region has seriously affected the Wheat supply worldwide and has caused a rise in the price of wheat. Due to the increase in price of wheat, demand for rice has increased as both rice and wheat are staple foods in many countries of the world. This substitution towards rice has caused imbalance in demand and supply of rice thereby increasing the price of rice.
Energy costs, which have been rising internationally, are a big part of rice production costs. It increases the cost of fertilizers and freight thereby increasing the prices of rice.
Thirdly, protectionist measures on food aggravate the food inflation. When one country imposes a ban on food export, it causes an increase in the price of that particular item at international level.
In May, India imposed an export ban on wheat to ensure food-security in the country after war broke out in Russia-Ukraine. It is feared the world’s top rice exporter, India, may impose an export ban on rice after wheat. It has been reported that rice traders have increased the purchase of rice from India. International buyers are looking for Indian rice because it is better in quality and is far cheaper than other competitors. Increased demand for rice due to increase in price of wheat and unregulated export of rice to other countries could lead the Indian government to impose a ban on rice after wheat and sugar. Though government officials say that India has sufficient stock of rice and does not plan to impose a ban on rice export. Rising wheat prices, higher costs of farming and fuel and protectionism would make rice prices worth monitoring next.
