Why realisation is lower for rice exports this fiscal

Intense competition among Indian rice exporters has led to rice shipment prices fetching lower prices despite India carrying a huge stocks of the cereals.

The lower realisations come at a time when the global food prices are showing an upward trend with rise in in the volumes shipped from the country.

During the April-December period of the current financial year, non-basmati volumes hit a record high of 8.21 million tonnes (mt), up 129 per cent over the same period last year. Exports are likely to be between 11 mt and 12 mt for the current fiscal. However, the average per unit realisations dropped by about 7.67 per cent to $373 per tonne from last year’s $404.

Similarly, in the case of basmati rice the shipments were up 19 per cent at 3.38 mt for the period. However, the per unit realisation for the April-December period dropped to $872 per tonne, a decline of 15 per cent over the same period last year’s $1,033.

With the pick up in global demand for the Indian rice, especially the non-basmati variety, traders and exporters were seen chasing buyers and in the process lowered the rates to grab orders.

Trade sources said that more people are exporting rice this year due to the current market trends.

For example, India could have sold rice to Bangladesh at a price above $425 a tonne when prices at other destinations such as Thailand and Vietnam were ruling at over $500. However, the intense competition among Indian companies saw rice being offered at a prices as lower as $402 a tonne.

According to Vinod Kaul, Executive Director, All India Rice Exporters Association (AIREA), the lower realisation in basmati rice is due to the fall in demand from the largest buyer Iran. “Exports to Iran are down by 29 per cent and those supplies are floating in the market,” he said.

Higher supplies

Further, Kaul attributed the dip in non-basmati realisation to the higher supplies in the market. “When the supplies are high, prices tend to drop. We are price-competitive in the international market as there is ample supply as the production is good, unlike Thailand and Vietnam, which are facing issues,” Kaul said.

“There is huge demand for our non-basmati demand as the prices are favourable as Thailand prices are much higher. There is a difference of $80-90 per tonne,” Kaul said.

BV Krishna Rao, President, The Rice Exporters Association, a body of non-basmati exporters, said a price differential of 5-10 per cent with the nearest competitor is acceptable, but not 20 per cent. “We are not happy with India losing money this way,” he said.

However, Rao said that export prices of non-basmati rice have firmed up in the past few weeks in line with the trend in global commodity prices. “Prices are up by about 10 per cent compared with January and we expect them to stay firm,” he said. India’s rice production is expected to touch a new high of 120.32 million tonnes for 2020-21 according to the Government’s second advance estimates compared to the final estimates of 118.87 million tonnes.

“Overall rice crop has been good. With the forecast being good, we are also expecting good next season,” Kaul said.

Apart from rice, the per unit realisation for wheat also has seen a decline. Wheat exports during April-Dec period were up almost five times at 9.76 lakh tonnes against 1.70 lakh tonnes in the same period last year.