Pakistan sees windfall in Indian rice export curbs

Pakistan rice exporters are set to make a killing in the global market after India, their main competition, decided to sharply raise the minimum export price of rice to deter exports and augment domestic supplies.

Traders in Pakistan expect to get a much higher prices for their rice now with India virtually staying out of the market and global rice supplies running low.

Pakistani traders said they were well stocked to fill the vacuum created by India in the world market and was in a position to supply a part of the 3 million tonnes rice which India sells to markets in West Asia and Africa.

But their emphasis would be better price realisation for traders rather than selling huge volumes, said Md Azhar Akhtar, chairman of Rice Exporters Association of Pakistan. The country has not set any minimum export price for rice.

"We don't have any shortage of rice stocks. We are ready to fill the gap created by India in the world market," Akhtar said.

"But we are interested in realising a higher price for our rice exports," he said. "Non-availability of Indian non-basmati rice is going to serve that purpose," he said. "This year exports could be similar to annual sales of 3.3 million tonnes."

Indian non-basmati rice export varieties face stiff competition from Thailand, Vietnam and Pakistan.

India, concerned over falling rice stocks and high prices, in March raised export prices of non-basmati rice to $650 (Rs 26,071) a tonne, up $150 from the earlier level, while the export price for aromatic basmati was fixed at $900 (Rs 36,099) a tonne.

Predictably, the neighbouring Pakistan has smelt a great opportunity to get better prices as its current export price for common rice variety is below $650 a tonne. Thai rice is priced around $900 a tonne, while Vietnam has little rice to spare this year with domestic stocks running low.

Afghanistan and Iran, the traditional Indian export destinations, are also expected to import more this year from Pakistan. "Exports through land routes would be more to Afghanistan and Iran," Akhtar said.

"The price outlook for global rice trade is bullish," said Anil Adalka, executive director of All India Rice Exporters Association.

India's move to raise the export price of ordinary rice had pushed global rice futures to a record high of $391 a tonne on Chicago Board of Trade.

CBOT rice price have over the past one year risen 90 per cent amid concerns over food security in emerging markets like India, China and Vietnam.

Vietnam's surplus rice stocks have almost exhausted and it would enter into a new supply agreement with traditional importers after assessing the size of its new crop. Vietnam, like India, curbed exports this year to ensure enough domestic supplies.

Vietnam, the world's second largest rice exporter, accounts for over 4 million tonnes in the annual global rice trade of 27 million tonnes. Thailand is the world's largest rice exporter with over 8 million tonnes annual sales.

India and Pakistan occupy the third and fourth slots among rice exporting nations.

Thailand's premium grade rice is expected to sell at a record $1,000 (Rs 40,110) a tonne by the middle of this year. Thai rice is currently quoting $900 a tonne amid reports of shrinking global supplies.

Non-basmati rice
Traders said Indian exports of ordinary rice varieties would be hit as global price ranges $400-590 tonne, much lower than the $650 minimum export price.

"Higher export price will stop outflow of ordinary varieties," said Anil Monga, managing director of Delhi-based Emmsons International.

India has been struggling to manage its food grain stocks, amid growing consumption and poor output, leading to rise in prices of essential food items.

India's headline inflation rose to a 45-week high of 5.9 per cent for week ended Mar 8, with most of the increase coming from higher food prices.

Though India raised the minimum export price, it does not plan to impose a complete ban on rice exports, traders said.

Govt Strategy
In order to ensure enough domestic rice supplies, India had brought down customs duty on rice imports to zero from the earlier 70 per cent.

As on March 1, the government had 9.25 million tonnes of rice in the central pool, down 40 per cent on year, and it seems unlikely that official procurement agencies including Food Corporation of India would be able to meet the mandatory buffer norms.

The norms stipulate 12.2 million tonnes rice stocks on April 1.

India was forced to import 5 million tonnes wheat in 2006 and 1.8 million tonnes in 2007 due to falling government stocks and rising prices.

"A similar scenario in rice cannot be ruled out," said R S Seshadri, a senior official at Tilda Riceland""a leading basmati exporting company.

Bangladesh exports
The Indian government has assigned five state-owned trading agencies Nafed, PEC, State Trading Corp, MMTC and West Bengal Essential Commodities Supply Corporation to supply 500,000 tonnes rice to Bangladesh to fulfil trade commitments.

Rice production in Bangladesh was severely hit last year due to floods and cyclones.

Bangladesh had agreed to pay $500 a tonne for buying 100,000 tonnes from India, while negotiations were on for the purchase of the rest of the grain, traders said.

While the price cap is likely to reduce ordinary rice exports, high-priced basmati rice export is unlikely to be hit, they said.

"Fixing the minimum price is not going to impact basmati rice export," said an Indian commerce ministry official.

Akhtar also echoed the same view as basmati rice is currently quoted at $1,500-1,600 a tonne, much higher than the export price of $900 a tonne.

India exported 1.04 mln tonne basmati rice in 2006-07.

The country annually produces around 90 million tonnes, the staple diet along with wheat for its one billion plus people.