The fortunes of local rice exporters have once again taken a turn for the worse as higher prices relative to the low quality of Pakistani rice continue to erode its demand in the international markets.
Subsequently, the export quotes for both the benchmark—5 percent broken and the 25 percent broken have taken a hit, with the prices having fallen below the Indian varieties and at par with Vietnam—which has historically been the cheapest sourcing destination for Indian rice in the Asian bloc.
This time last year, Pakistani rice—both white and Basmati—was selling at an easy premium over Indian varieties, with the non-Basmati 5 percent broken being considered as one of the better alternatives to the higher quality Thai rice which had become too expensive post the Thai government’s paddy pledging scheme.
However, in the space of one year, India has managed to pretty much out-manoeuvre Pakistani exporters, clawing back the crucial Iranian market share and gaining entry into new geographical arenas.
Where regional demand has hit a plateau, Indian rice exports to Africa, Middle East, Nepal, Singapore and the UK have increased significantly over the last 10 months, with the country having exported upwards of 6 million tons of rice since January.
This is despite the fact that India’s government raised the minimum price it pays to growers to a record last year, making supplies from the country more expensive amid a global glut. The accompanying graph shows a clear convergence of export prices of Indian rice with the prices of the much superior Thai 5 percent broken, whereas prices for the same varieties from Pakistani and Vietnamese origin remain depressed.
Albeit better branding and sustained quality have consistently set Indian rice apart within the region, sources report that a major factor tipping the scale in India’s favour is the fact that international buyers are rapidly losing faith in the quality certification of rice from Pakistani origin.
Talking to BR Research, a number of rice millers and exporters said after TDAP took control over the QRC (quality review committee) from REAP, international buyers have been wary of the bureaucratic involvement in the certification process. Additionally unnecessary demands and the new ill-devised and winding SOPs set in place by TDAP have also reportedly led to delayed and missed shipments, causing domestic exporters to lose orders worth millions of Rupees in the last few months.
The mistrust at the buyer’s end has also been exacerbated by the discovery of Khapra beetles in a dispatch of Pakistani rice sent out to Mexico. After the incident, both Mexico and USA have banned the entry of Pakistani rice into their ports and there has been visible dwindling of orders from the EU and some African nations, report sources.
All of this has led to a significant drop in orders over the course of the last few months, as exhibited by the data released by the PBS showing Pakistan’s rice exports for the month of August at around 182,805 tons, down about 37 percent from the previous month. Although this number has improved year on year, the market dynamics should have dictated better demand for Pakistani rice at the tail end of the season (July-Aug) when domestic supplies are historically low and overseas demand peaks.
In the meantime, things just keep improving for India. The recent slide of the Indian Rupee has allowed for some softening in the export quotes for Indian rice and following the intervention of Commerce and Industry Minister Anand Sharma during his visit to ASEAN Ministerial meeting in Brunei last month; Russia has lifted the ban on import of non-Basmati rice and oilseeds from India, a move likely to give further boost to these exports.
Going forward, rice prices within the region will likely stay under pressure as uncertainties over the continuity of Thailand’s paddy purchase programme compounds the downward pressure exerted by a weak external demand.
However, prices in the Indian quarter are expected to remain steady, so there are some expectations that the slide of the downtrodden Pak rupee against the greenback may help take down prices to a level where they become attractive to buyers once more.
Source:- brecorder.com
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