The Hindu Business Line : Basmati exports ring the wrong bell this time

New Delhi, Dec. 18 In any agri-commodity, the normal tendency is for prices to start falling at the start of the harvesting season and then to rise as mandi arrivals dwindle with farmers disposing of the bulk of their crop. But in basmati, it is pretty much the opposite that is taking place this time round.

Since the start of this month, average auction prices of paddy in major northern Indian mandis have fallen by nearly Rs 500 a quintal for traditional basmati varieties such as HBC-19 and around Rs 380 a quintal in the case of evolved Pusa Basmati-1. This, when an estimated 90 per cent of the total Pusa Basmati and 85 per cent of the traditional basmati crop has already been marketed by now.

The current season saw HBC-19 paddy prices begin at Rs 2,450-2,600 a quintal in late-October and cross Rs 3,000 levels by the second week of November and remain there for virtually the rest of the month. But now, prices have dropped to around Rs 2,400 a quintal, which is Rs 400 below even last year’s corresponding level.

Similarly, Pusa Basmati-1 rose from Rs 1,700-1,800 in September to Rs 2,000-2,100 a quintal in the peak marketing month of November, before plunging to the current Rs 1,600 level. “This kind of a bell curve (against the usual bell-upside down pattern) we are seeing for the first time,” noted a leading Delhi-based exporter.

Price trail

The 2007-08 season witnessed a somewhat different phenomenon, where prices kept increasing almost indefinitely. Pusa Basmati-1 went up from Rs 1,800-2,100 a quintal till November to Rs 2,500-2,700 in March and Rs 3,700-3,800 by June. HBC-19 likewise skyrocketed from Rs 2,400-2,500 a quintal till November to Rs 3,000-plus in February and Rs 4,000-plus towards May.

So, what’s been happening? “Last year, rice in general was in short supply globally. That, combined with sustained demand from buyers desperate to stock up, kept driving prices in one direction,” the exporter pointed out.

What about this time? “Well, we thought the party would continue. Although the Centre clamped an export duty of Rs 8,000 a tonne on basmati rice (over and above a minimum export price of $1,200), everybody rushed to buy paddy expecting that these would go even while the global appetite for Indian basmati would not diminish,” he added.

As it turned out, neither were the export disincentives lifted nor did anybody anticipate the consequences of the global financial meltdown on demand.

Foresee decline

“The outlets here do not want to build-up stocks now because they foresee a decline in prices in the months ahead. Even at the consumer end, the family that earlier bought 10 bags (of 45 kg each) to meet six months’ requirement is purchasing only one bag at a time,” claimed Mr Omar Saleh Babakar of Saleh Babakar & Sons Co, Saudi Arabia’s biggest basmati importer.

He also referred to the cheaper basmati from Pakistan, which has done away with all export restrictions and has also capitalised on its much more weakened currency. “I can today import Super Basmati from Pakistan at $ 00-800 a tonne cost & freight, whereas your equivalent Pusa costs $1,250-1,300. As far as quality differences go, even they have started supplying sella (par-boiled) rice that so far only Indian firms were selling,” Mr Babakar told Business Line on phone from Riyadh.