With global commodity prices declining in the first half of FY16, realisations from basmati rice exports from India have plunged. The average export price of basmati slipped from $1,352 per tonne in April-November 2014 to $897 in the same period in 2015. Now that sanctions against Iran have been lifted, direct exports to Iran will resume, helping improve realisations. Till now, exports were routed through Dubai, at lower rates.
Export volumes surged 23 per cent during April-November 2015 over the year-ago period, indicating demand was good at lower price.
According to sources in Agri and Processed Food Products Exports Development Authority, the turmoil in West Asian countries and a sharp decline in crude oil prices have put the exporters in a tight spot as the purchasing power of the traders in the importing countries has been hit. The government cannot do much to bail out the exporters as commodity prices have plummeted globally.
Iran's resumption of imports on 15 December 2015 may provide some cushion to exporters. Due to sanctions imposed on Iran, basmati exports to that country remained suspended from October 2014 to December 2015.
Iran has been a major importer of Indian basmati and contributes 25 per cent to the exports kitty. The revival of exports to Iran after lifting of sanctions has brought a sentimental shift among exporters. "We expect an annual demand of 1 million to 1.2 million from Iran, as the traders over there have been running low stocks. This may also trigger a revival in price but it is too premature to quantify the price revision", said Salil Bhatia, of D D International, a top basmati exporter from India. Iran is an important market for Pusa 1121 variety and reopening basmati trade with it has already catalysed the demand. The basmati prices have touched a low and our prices in international market are close to those of South American rice."
Despite higher volumes, low realisations have forced most exporters to look at the domestic market. Amritsar based Amar Singh Chawal Wala, a leading rice exporter having an average annual basmati exports of 80,000 metric ton is projecting a fall in exports this year. Arvinder Pal Singh, the Director of the company said that they registered a 10 per cent growth in volume last year but falling crude prices and eventual fall in commodity prices may make export unviable. The companies sells under 'Lal Quila' brand rice and gearing up to consolidate its presence in domestic market.
The experts say that higher sowing under basmati paddy in the last two kharif seasons created a glut in the market and falling export price may discourage basmati sowing in kharif 2016 equating demand and supply and bring price correction. Basmati acreage was 2.1 million hectare in kharif 2014, up 35 per cent over kharif 2013. It went up to 2.2 million hectare in kharif 2015. Higher acreage also contributed to dwindling prices.
Although, the prices crashed at the farm gate level this year, plunging from an average Rs 4,000 a quintal in kharif 2014 to Rs 2,200-2,500 in kharif 2015, this could not provide any safeguard to exporters.
Farmers have evidently been the most effected and in some cases have not even been able to recover cost. Exporters, who incur 20-30 per cent of the carrying cost and about 14-15 per cent of finance costs, are in a catch-22 situation, added Singh.
Big brands such as L T Overseas have a legroom to supply at prevailing prices and Ashwani Arora, the Director of the company is sanguine over the revival of prices.
A Karnal-based exporter, and promoter of Maharani Brand of rice, Ankit Setia conceded that there have been challenges on export front but it's a part of business cycle. Setia is also aggressively expanding its domestic footprint and targets a national presence in a few months.
Source :.business-standard.com
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