Weak monsoon forecast tempers rice stockpile concerns

Nearly 4 lakh tonnes of unsold rice meant for exports -- both basmati and non-basmati -- have accumulated over the past couple of months at three key west coast ports of India -- Kandla, Mundra and JNPT. That apart, India is staring at a rice carry-over stock of 49 million tonnes (mnt) in the 2026 crop season against 48 mnt in 2025. As the country approaches the kharif paddy season beginning June, with harvesting slated for September-October, such elevated opening stocks would typically trigger concerns of a supply glut.

Monsoon to balance supply dynamics

However, both trade circles and the government appear relatively unperturbed. The primary reason lies in the expectation of a weaker-than-average monsoon this year, which is likely to curb kharif output and offset the excess carryover stocks.

Around 70% of India's rice production comes from the kharif season, making monsoon performance a critical determinant of the total output. With forecasts indicating sub-par rainfall, production is expected to take a hit. This anticipated decline in output is being seen as a natural counter-balance to the current surplus stocks.

As a result, even though the new crop season will begin with higher-than-usual inventories, the market does not foresee a prolonged oversupply situation. Government agencies, too, are factoring in this production risk and are therefore not overly concerned at present.

Limited domestic absorption capacity

One key reason why the stockpile issue persists is the limited scope for diverting these back into the domestic market. India's rice consumption, estimated at around 121 mnt in 2025, has largely stabilised. Trade sources say, consumption is unlikely to increase even if prices soften. Consumption so far in 2026 has averaged 127 mnt as per BigMint data.

Moreover, paddy itself is a short-duration crop, typically spanning about five months from sowing in June to harvesting by September-October. This limits the possibility of farmers shifting to alternative crops to mitigate production risks.

Export concerns overshadow supply worries

While supply-side concerns remain contained, the bigger worry for traders at present is uncertainty in overseas demand, particularly from the Middle East. The ongoing geopolitical tensions involving Iran, the US and Israel have disrupted trade flows, impacting nearly 30% of India's basmati exports, which are traditionally destined for markets like Iran, Saudi Arabia and the UAE.

Although a recent ceasefire has led to a modest 6-7% increase in prices, the upside remains limited. Exporters are reluctant to sell at lower price points, even as India continues to remain among the most competitive suppliers globally. Non-basmati export offers are currently at around $360/tonne (t), slightly cheaper than Thailand's $360-370/t. India's exports have averaged 24 mnt so far in 2026 while total exports in 2025 averaged 23 mnt.

Logistics, quality issues add pressure

Exporters are under pressure to liquidate stocks lying at ports, as funds remain locked and storage conditions pose risks to grain quality. High moisture levels in port environments accelerate deterioration, raising concerns over eventual realisations.

Compounding the issue are elevated shipping costs. Freight operators continue to impose war-related surcharges and are seeking demurrages for consignments delayed due to disruptions such as the closure of the Strait of Hormuz. Exporters, however, are resisting these additional costs, leading to a stalemate with shipping lines while importers are also not willing to cough up these additional expenses.

Storage challenges persist

On the domestic front, storage constraints remain a concern. Last year, the government, through FCI, grappled with limited storage capacity. A similar approach is likely this year -- procuring paddy and outsourcing storage to millers -- to manage the incoming crop.