Question

Covid-19 lockdown: Indian rice exports suspended on supply chain disruption
Reuters

Last updated on April 6, 2020 at 07.21 am
Indian rice traders have stopped signing new export contracts amid the nationwide lockdown to curb the spread of coronavirus, as labour shortages and logistics disruptions have hampered the delivery of even existing contracts, industry officials said.
The halt in exports from the world's biggest exporter is allowing rival countries such as Thailand to raise shipments in the short term and lift global prices, forcing millions of poor consumers in Africa to pay higher prices.

"Shipments have stalled as transport has become very difficult because of the lockdown. Drivers are not coming and labour is not available at mills and ports," said B.V. Krishna Rao, president of the Rice Exporters Association (REA).

Indian traders have stopped offering quotes to overseas buyers as they are not sure when they would be able to ship their cargoes, four top exporters told Reuters.

India's export volumes have fallen by four to five times, said Prem Garg, chairman of the Lal Mahal Group, which exports rice to more than 44 countries.

India will gradually pull out of a three-week lockdown in phases, Prime Minister Narendra Modi has said.

About 400,000 tonnes of non-basmati rice and 100,000 tonnes of basmati rice, meant for March-April delivery, are either stuck at ports or in the pipeline due to the lockdown, exporters said.

New Delhi mainly exports non-basmati rice to Bangladesh, Nepal, Benin and Senegal, and premium basmati rice to Iran, Saudi Arabia and Iraq.

As Cambodia, Vietnam and Myanmar curbed their rice exports, demand for Indian rice surged, but traders are not signing new contracts, said Nitin Gupta, vice president of trader Olam India's rice business.

Thailand, the only key exporter to offer rice currently, has seen its export prices soared to their highest in seven years this week.

Before the lockdown, India was offering 5% broken parboiled variety   at around $365 per tonne free-on-board basis. Thailand is now been offering the same grade at around $540 per tonne.

"After the lockdown, there will be a huge demand for Indian rice, as India is in a sweet spot in terms of offering competitive prices," said Olam's Gupta.

Since India has vast surplus stocks, it could start cashing in on demand once labour shortages ease, said REA's Rao.

India's rice exports in 2019 fell 18.1% from a year earlier to 9.87 million tonnes, the lowest in eight years, as demand moderated from key Asian and African buyers.

India is likely to produce 117.47 million tonnes of rice in 2019/20 against an annual consumption of about 100 million tonnes, with state inventories at 31 million tonnes. If the lockdown is extended, or the pandemic spreads among key buying nations, denting demand, India's rice industry could suffer major losses, said large exporter Vijay Sethia.

Question 1 :
What types of international business risks, you could imply from your reading of this article; discuss them?

Answer 1

Types of international business risks:

1. Strategic Risk

India is facing direct competition from Thailand. which could impact the decisions of India's rice business. If the lockdown continues India will face the strategic risk and ie will cause an impact on the buyers, sellers, exporters, labors, etc

2. Operational Risk:

Because of the lockdown industries are not able to do the work and it impacts the country operations. India is not able to produce the things which he exports to the other countries which will cause international risk for the country.

3. Political Risk:

Political actions were taken by the government to save the lives of the people of the country and lockdown the country has caused the impact on the industries and give opportunities for foreign companies to invest in the domestic companies.

4. Country Risk:

Due to the instability of the country, it becomes difficult for companies or industries to settle the thing that can caused international risk for them.

5. Economic Risk:

Economic of the country is in the risk due to the shut down of the operations. Changing of fiscal rates, exchange rates, interest rates caused risk for the country.

6. Terrorism Risk:

Due to the lockdown terrorism can be increased. Countries can take advantage of this situation and promote terrorism in India by spreading the coronavirus as much they can.

So these are the type of international business risks caused due to the corona virus.