India’s ban on non-basmati rice exports will force UAE importers to look elsewhere

UAE shoppers and F&B businesses need to keep close watch for signs of food price inflation creeping in. But there is one factor that’s to their advantage – shipping costs remain stable or have dropped across major sea routes.

Dubai: Food traders in the UAE are moving swiftly to source more rice imports from other producer markets and compensate for the ban India has placed on all non-basmati varieties.

So far, the Indian ban has had limited impact on retail rice prices in the UAE, according to market sources.

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“India has always been a major supplier of rice to the UAE,” said Dr. Dhananjay Datar, Chairman and Managing Director of Dubai-based Adil Group, one of the biggest importers of Indian food commodities. “There will be an immediate shortage of Indian rice in the local market, leading to supply constraints.

“It could lead to price volatility – the need of the moment for traders and food importers in the UAE is to seek alternate sourcing arrangements.”

The latest ban by India adds to the export restriction the country has had on wheat for two years now. (The bans have been imposed to ensure sufficient supply levels for India’s domestic consumption.)

Rice is not the only issue on the table that UAE’s consumers, F&B businesses, retailers and traders need to keep close watch on over the coming weeks. Global wheat prices are already coming under pressure as doubts resurface about steady Ukrainian supplies through Black Sea ports.

Price rises of food commodities had been at the heart of the inflationary pressures the UAE and Gulf economies experienced through most of 2022. Since the start of the year, food prices had been dropping, and it was felt that by summer rates would have settled down to 2018-19 levels.

Seeking alternative sources for rice largely depends on availability. Many countries have faced farming crises this year. At the same time, UAE growers have achieved immense success with blueberries and other vegetables. I expect this to be replicated soon. 

– A.A.K. Musthafa, Managing Director of AAK Group

But with the latest developments – India’s non-basmati rice ban and concerns about Ukraine wheat supplies – have cast fresh doubts on what could be in store for food staples and their prices.

A more gradual price rise?

Local importers might have some time to make those alternate sourcing arrangements, whether that’s tapping suppliers in Thailand, Vietnam or Pakistan for rice, and Australia or other producers when it comes to wheat.

Plus, the fact that retail demand in the UAE will drop – even if slightly – because of residents heading out for their summer breaks will give the market that much more time to place orders and have the shipments come in.

In other words, there could be less pressure on UAE retail level pricing. Plus, given these are daily essentials, the authorities will be monitoring the price situation on rice closely, retailers say.

“UAE wheat importers now source from all possible global producer-suppliers rather than rely heavily on one or two,” said the head of commodity trading at a local firm. “With the India ban on non-basmati rice, the same options exist for UAE traders.

“I think the situation can be managed in a matter of weeks, and without too much of a price rise.”

Shipping rates are steady

Another factor that should prevent a run up in food prices relates to the cost of shipping. All through the first seven months, container rates on major routes had been steady or dropping further. Whatever be the case, shipping costs will not be inflating food prices – at least for now, which was not the case in 2021-22.

The good news is that in the past three years supply chain and logistics challenges have been brought well under control. Regarding the UAE, authorities, such as the DMCC, have established systems to explore alternative sources immediately after a crisis arises. Because of this, prices have stayed stable. 

– Lal Arakulath, CEO of Kreol Group

According to Datar, even then, ample caution must be exercised to tackle the situation. The onus rests on finding alternate sources in the least possible time.

“To navigate such challenges, UAE importers can collaborate with other rice exporting nations and explore solutions to meet demand for all major food commodities,” said Datar. “Only prudent planning and adaptability can help maintain food stability during these unprecedented times.”

Published Date: July 24, 2023