India’s rice market is undergoing a dramatic transformation in 2024–25, reshaping global trade flows and domestic dynamics with far-reaching consequences. The country is deploying a record 5.2 million metric tons of rice—almost 9% of the world’s trade volume—into ethanol production, a striking reversal from recent memory when shortages forced the government to curb exports. This policy shift stems from an unprecedented surge in rice stockpiles, triggered by consecutive bumper harvests and favorable monsoon conditions. As India barrels toward its ambitious 20% ethanol blending mandate—already nearly achieved at 19.8%—rice has overtaken sugarcane as the primary ethanol feedstock, in part due to last year’s sugarcane drought. Meanwhile, India’s rice reserves tower at 59.5 million metric tons, dwarfing domestic requirements. Despite recently eased export restrictions, India’s export ambitions remain balanced against domestic price stability, though a projected 22.5 million tons of exports in 2025 could reshape market shares for global players like Thailand and Vietnam.

Corn and other grain markets are also impacted, as rice-based ethanol production has eased the demand pressure that spiked corn prices and imports last year. Yet, questions linger about the economics of ethanol expansion, with processors calling current policies insufficiently lucrative for large-scale rice-based fuel production. Looking ahead, India faces both an opportunity and a challenge: managing record surpluses, achieving energy goals, and stabilizing global prices in an ever-evolving weather and policy landscape.

📈 Prices

🌍 Supply & Demand

• Bumper Harvests: India harvested a historical record of 146.1 million MT, versus domestic use of just 120.7 million MT.
• Stockpiles: FCI reserves as of June 1 are 59.5 million MT (requirement: 13.5 million MT).
• Ethanol Shift: 5.2 million MT channeled to ethanol (from less than 3,000 MT last year).
• Exports: Projected exports for 2025: 22.5 million MT (+25% y/y).
• Global Exports: India holds over 40% of world rice export market.
• Feedstock Economics: Rice-based ethanol production price: $262/MT, purchase price for ethanol: $0.68/liter—margin seen as too thin for major expansion.
• Corn Substitution: Rice use in ethanol relieves pressure on corn prices and demand.

📊 Fundamentals

• India’s favorable monsoon is driving another large crop and sustained surplus outlook.
• The government seeks to balance between managing oversupply (preventing further domestic price declines) and maximizing export revenue.
• Current steady prices reflect large available stocks and supply-side certainty.
• Sugarcane availability for ethanol remains depressed, reinforcing rice’s role in the government’s blending mandate.
• Potential increases in rice allocation for ethanol if surpluses continue.

🌦️ Weather Outlook & Crop Impact

• India: Monsoon conditions for 2024–25 are forecast as above-average, supporting healthy crop development.
• Vietnam & Thailand: No major disruptions expected; normal rainfall supports planting and yield in Southeast Asia’s key rice-growing zones.
• Risk Factors: Any deviation in India’s monsoon pattern could shift global supply expectations sharply; watch for July–August rainfall anomalies.

🌐 Global Production & Stocks

📆 Forecast & Trading Outlook

• Short-Term Price Stability: Massive Indian stocks and strong export pace favor stable pricing, with limited upside risk until at least Q3 2025.
• Export Competition: India’s record exports may pressure market share and pricing for Vietnam, Thailand, and Pakistan.
• Weather Monitoring: Trade focus should remain on July–August monsoon developments; poor rainfall could quickly firm prices despite ample stocks.
• Ethanol Policy: Any adjustment to official grain or ethanol procurement prices could shift internal grain flows or prompt further domestic market changes.

• Stay hedged if exposed to Indian supply or export pricing.
• Exporters in Southeast Asia: Prepare for increased Indian competition in traditional markets.
• Buyers: Consider forward buying to lock-in stable prices amidst continued supply abundance.