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Rice importing nations are stiffly resisting any rise in prices despite fears of a possible impact on paddy cultivation this year in Asia due to weather-related problems.
According to exporters, though rice prices in the domestic market have increased, the global market is heading south.
No buyers after hike
“Buyers abroad are trying to buy rice at lower prices. Rates have come down by 5-10 per cent. This is mainly on account of a drop in freight charges, which have softened. Prices in the domestic market are high,” said VR Vidya Sagar, Director, Bulk Logix.
“A few days ago, our 5 per cent parboiled rice prices increased to $385 a tonne and this resulted in no buyer showing up. Prices are now lower at $365,” said BV Krishna Rao, President, The Rice Exporters Association (TREA).
“Rice buying has slowed. We are getting good enquiries but they are not being converted into businesses. There is some resistance to higher prices,” said M Madhan Prakash, President, Agri Commodities Exporters Association (ACEA).
Asian prices
According to the Thailand Exporters Association, Indian 5 per cent parboiled rice is quoted at $358-362 free-on-bard (f.o.b) currently, while the rice from Pakistan is quoted at $408-412. Thailand is offering 100 per cent sortexed parboiled rice at $445 a tonne f.o.b.
Even in white rice, India is offering the grain at a competitive $343-347 a tonne f.o.b for 5% broken, while Pakistan is quoting $358-362. Vietnam is offering at $393-397 and Thailand at $439.
According to trade sources, Sona Masuri white rice harvested in December 2021 in South India is quoted at ₹4,000-100 a quintal. Old stocks of the rice are ruling at ₹4,450-500, while RNR white rice harvested in December last year is available at ₹4,000-150 and older stock at ₹4,800-900. In Telangana, JSR white rice is offered at ₹5,800-6,000 and HMT at ₹5,300-400.
Risk of output loss
Currently, the national weighted average modal price (the rate at which most trades take place) of rice is ₹3,103 a quintal against ₹2,983 on July 1. One of the reasons for the rise in prices is that the sowing of paddy during the current kharif season is down 13 per cent from a year ago.
As a result, India faces the risk of losing at least 10 million tonnes (mt) of rice production due to this. During the last crop year (July 2021-June 2022), the country produced a record 129.66 million tonnes (mt) of rice with 111.04 coming from kharif production. About 80 per cent of the total rice output is from the kharif season.
According to the US Department of Agriculture, India will likely produce 128.5 mt of rice this crop year, while its exports, including Basmati rice, are estimated at 21.75 mt, up from 21.38 mt last crop year. As per the Agricultural and Processed Food Products Export Development Authority (APEDA), non-basmati rice exports last fiscal were 17.26 mt against 13.08 the previous year.
Bangladesh crops
The problem for India is Bangladesh’s Aush and Boro crops have been impacted by dry weather as well as floods this year. Dhaka will likely import 6.5 lakh tonnes of rice this year, the USDA projected.
“Bangladesh is buying more currently,” said Bulk Logix’s Sagar. In order to import more rice, the Sheikh Hasina Wazed government has cut import duty to 25 per cent and is allowing private firms to ship in the grain freely.
Bangladesh’s rice imports are the main reason why the foodgrain prices are increasing in the country. According to trade sources, the neighbouring country is sourcing premium rice from even States such as Karnataka.
In parts of Myanmar, paddy sowing has been affected by dry weather and lower rainfall, a situation faced by eastern parts of India. All these are putting pressure on the market but buyers are resisting.
FAO price index
“Ethiopia, Djibouti and Ivory Coast are resisting higher prices. They are looking at alternatives such as Pakistan and Thailand,” Sagar said.
Weather affecting foodgrain production comes at a time when the Food and Agricultural Organisation (FAO) price index dropped for the fifth consecutive month in July to 140.9 after peaking in March at 159.7. In this, the cereals index declined to 147.3 in July from 170.1 in March.
The FAO said inconsistent demand from Asia and African buyers tended to weigh on market sentiments across Asia, besides currency depreciation against the US dollar. Experts have, however, warned that any rise in foodgrain prices could be sharp as they have dropped sharply over the last few weeks even as inventories have also declined.
PMGKAY scheme
TREA’s Krishna Rao said rice exports could be affected if the Centre decides to end the Prime Minister Garib Kalyan Anna Yojana (PMGKAY), under which rice and wheat are distributed free of cost through ration shops to the below poverty line people. Currently, more rice is handed out than wheat as the latter’s production was affected last crop year and its stocks are at a five-year low.
“As long PMGKAY continues, the poor will take foodgrains from ration shops. Once it is ended, they will turn to the open market, which will result in 7-8 mt being available for exports being affected,” he said.
It would also lead to a rise in prices in the domestic market and for exports to near the minimum support price (MSP) level. Currently, they are below the MSP. For the 2021-22 crop year, the Centre had fixed ₹1,960 a quintal for Grade A paddy. For this current crop year, it has been raised to ₹2,060.
During the first quarter of this fiscal, 4.34 mt of non-basmati rice, valued at ₹12,099 crore, have been exported. According to the Director-General of Commercial Intelligence and Statistics, Kolkata, exports of rice, including Basmati, are up 18.2 per cent in the first quarter at ₹21,043.34 crore.
Prices of rice are increasing in the domestic market in view of export demand and fears of a lower crop. This comes on the heels of wheat production declining this April on account of a heatwave that swept across the country.
As a result, the Centre has stopped distributing wheat under PMGKAY in some States. Instead, it is providing rice.
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