Rice Exports from India Fall, Prices Recover after Hitting 5 Year Low

Data released by the government revealed decline in rice export from India due to subdued global demand. Price of basmati and non basmati rice are currently at 5 year low. However, non-basmati rice prices recovered last week.

Decline

Indian rice exports fell by 42% in October 2019 to 485,898 tonnes. The surplus supply of rice during harvest season decreased its domestic prices too. However, domestic prices recovered after hitting five year low owing to increased MSP and supply decrease from flood affected areas. Despite being the biggest rice exporter, India’s exports decreased by 28% during April-October 2019 owing to a decrease in demand from Iran for basmati rice and African countries for non-basmati rice. The price for India’s 5% parboiled non-basmati rice variety decreased to USD 356-USD 361 per tonne in the first week of December, being lowest since January 2017. India exports non-basmati variety to Bangladesh, Nepal, Benin and Senegal and Basmati to Iran, Iraq and Saudi Arabia.

Reasons

Iran, one of the largest importers of Indian basmati, accounts for one-fourth of Indian’s exports while European countries import around 8% of Indian rice. India has lost its export contracts from the EU and Iran due to strict pesticide residual laws and ending oil imports respectively. It also came into news that Pakistan’s basmati rice export to Iran increased since the US sanctions on Iran. On the contrary demand for Vietnam’s 5%, parboiled rice has picked up from the Philippines. Thai variety prices remained unchanged owing to the strength of the local currency. Besides, China is favoring Cambodia and Myanmar for importing rice due to low prices.

Indian rice is losing international competitiveness due to high domestic prices. This is caused due to high MSP on paddy by the government. Earlier, government provided 5% MEIS benefit to exporters of non-basmati rice but they stopped MEIS benefit on 24th of March 2019. Government must provide subsidies for international sales to encourage exports.

Basmati rice prices decreased to USD 800-USD 900 per tonne from USD 1100-USD 1200 per tonne in six months. Further, no new basmati rice export contracts to Iran have been signed. Usually Iran signs these contracts with India by the end of September or beginning of October every year.

In all, excess supply in domestic market and low demand for export is a worrisome situation of Indian rice farmers and exporters. Further, export to Iran requires a resolution to bypass US sanctions.

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