“We are facing stiff competition from Vietnam and Pakistan and the trend is very obvious now. We will not achieve last year's numbers," Mittal said.

The combined effect of local transportation costs, a strengthening rupee currency and an increase in the support price the government pays to farmers translates to a rise of $20 to $50 a tonne in India's export price, Garg said.

The government last month allowed fuel retailers to raise the price of subsidised diesel in steps equivalent to about one U.S. cent a litre every month.

The Indian rupee breached the key psychological 53-to-a-dollar level on Monday to rise to its highest in more than 3-1/2-months, on bullish risk sentiment and lined-up dollar inflows.

In June last year the government raised the price at which it buys rice from local farmers by more than 15 percent.

Resorting to protectionist measures when rice prices shot up in Asia, India clamped down on exports in 2009. But bumper harvests since have swelled supplies, with the state-run Food Corp running out of storage space.

Images of rotting grains in faded bags under tarpaulin sheets attracted criticism of the government, which allowed private traders to export in 2011.

But grain bins are still overflowing.

Rice inventory at government warehouses on Jan. 1 was 32.2 million tonnes, against a target of 11.8 million tonnes.

"With huge stocks at home, ideally we should have scaled last year's level but our shipments will instead fall," said M P Jindal, president of the All India Rice Exporters' Association.

Eoin Treacy's view Rice is a staple food for much of Asia and its price has a significant impact on the region's inflationary measures, particularly those of poorer countries. As India progressively removes subsidies on fuel, the fiscal deficit will come under less pressure and it will help to encourage efficiency. However, the short-term impact is likely to be inflationary. As the government attempts to massage this issue it has been buying more grain than it did last year in order to supplement diets.

Rough rice has been ranging with a mild upward bias since 2011. It has returned to test the $16 area which has been a psychological hurdle for more than a year and a clear downward dynamic would now be required to question current potential for a successful upward break.

From what I have read, there is no shortage of the grain internationally, and rough rice still trades in contango. However, what does seem apparent is that the market is going through an adjustment and that the marginal cost of production is rising. If a weather event challenges this finely balanced status quo prices could move sharply higher.

The medium-term bullish outlook for rice is complemented by soybeans which has at least stabilised near 1400¢ and corn which has at least paused near 700¢. Cotton broke out of a seven-month base in January and has been consolidating above 80¢ since. A sustained move below 79¢ would be required to question recovery potential.

The Continuous Commodity Index rallied impressively from its June lows near 500 to encounter resistance near the psychological 600. It has ranged with a downward bias since September but now appears to be in the process of breaking the four-month progression of lower rally highs. A sustained move below 560 would now be required to question medium-term scope for continued higher to lateral ranging.

One of the repercussions of the devaluation of the Yen has been the apparent reluctance of its smaller neighbours to accept the concurrent strength in their own currencies. However the potential for greater commodity price inflation may inhibit the flexibility of some countries to respond by weakening their currencies.

The Asia Dollar Index has paused in the region of the upper side of the underlying trading range and the 200-day MA. However a clear upward dynamic will be required to confirm a return to demand dominance beyond the short term.