The prices of basmati paddy and rice are likely to remain firm this year due to estimates of lower output following erratic monsoon rainfalls in its major growing regions.
Data compiled by the Indian Meteorological Department (IMD) showed India’s cumulative rainfalls this season was 5 per cent lower than the long period average (LPA) with the northwest India recorded a massive 11 per cent less rainfalls this year til September 20. According to industry sources, major basmati paddy growing area received much lower than needed rainfalls this season which not only hit overall sowing area but also plants in the field.
The price increase might hurt exports of this aromatic rice which remained a favourable choice for consumers in Iran, Saudi Arabia and European countries.
“During the current season, there has been rainfall deficit in the key basmati rice producing states of Uttar Pradesh and Haryana over the previous year’s monsoon season till mid-September 2017 as well as lower water reservoir levels in Uttar Pradesh. These factors can translate into lower paddy production in the current crop season, and thus the paddy prices are likely to open firm in the oncoming procurement season,” said Deepak Jotwani, Assistant Vice President, Icra.
Meanwhile, India’s basmati rice exports have witnessed a rebound in the current fiscal with Q1 FY18 registering a 32 per cent growth in exports contributed by 25 per cent increase in realisations and 7 per cent increase in volumes. This comes after a three year consecutive decline in basmati exports till FY2017 (Rs 21,605 crore). In the past, despite the volumes holding firm, the exports have been adversely impacted by pressure on realisations (from peak of Rs 77,988 a tonne in FY2014 to Rs 54,011 a tonne in FY2017), driven by lower demand in the global market as well as lower paddy prices over the procurement seasons of FY2015 and FY2016.
Gurnam Arora, Joint Managing Director, Kohinoor Foods Ltd, said, “Basmati rice is likely to remain firm this year on lower output estimates.”
An Icra report said that basmati rice exports in the current fiscal have been encouraging, especially driven by demand from Iran. The Middle Eastern countries are the biggest importers; and also a source of volatility in demand. Demand from Iran, the second largest importer has been fairly volatile, primarily on account of import bans imposed from time to time. In Q1FY2018, Iran has been the primary contributor to growth in industry exports – contributing around 40 per cent to the total. However, from August 2017, Iran has again discontinued importing Basmati rice from India.Resumption of imports by Iran, which is anticipated around the procurement season, would be critical for the overall demand for Basmati rice. Any delay in the same could dampen the paddy procurement in the upcoming season as well as subdue the exports outlook for H2FY2018 and FY2019. This is especially material in the light of decline in volume sales from other key market - Saudi Arabia (13 per cent of total exports in Q1FY2018 as against 20 per cent in FY2017).
On the supply side, during the last procurement season of October-December 2016, basmati paddy prices had firmed up by 20-25 per cent across varieties, on the back of relatively lower production.
Meanwhile, the demand concerns in the form of Iran import ban and sluggishness from other key geographies would be overcome and export volumes in FY2018 to be around 4.1 million tonnes (4 per cent higher than FY2017). In addition, higher paddy prices in the last procurement season and likelihood of firm prices in the upcoming procurement season are expected to push up the average realisations in FY2018. As a result, export value is expected to grow to around Rs 26,000 crores in FY2018, a jump of 21 per cent over FY2017.
Meanwhile, India’s basmati rice output is estimated to have declined by over 18 per cent to eight million tonnes (mt) for 2016-17, compared to 9.8 mt the previous year.
Data compiled by the Indian Meteorological Department (IMD) showed India’s cumulative rainfalls this season was 5 per cent lower than the long period average (LPA) with the northwest India recorded a massive 11 per cent less rainfalls this year til September 20. According to industry sources, major basmati paddy growing area received much lower than needed rainfalls this season which not only hit overall sowing area but also plants in the field.
The price increase might hurt exports of this aromatic rice which remained a favourable choice for consumers in Iran, Saudi Arabia and European countries.
“During the current season, there has been rainfall deficit in the key basmati rice producing states of Uttar Pradesh and Haryana over the previous year’s monsoon season till mid-September 2017 as well as lower water reservoir levels in Uttar Pradesh. These factors can translate into lower paddy production in the current crop season, and thus the paddy prices are likely to open firm in the oncoming procurement season,” said Deepak Jotwani, Assistant Vice President, Icra.
Meanwhile, India’s basmati rice exports have witnessed a rebound in the current fiscal with Q1 FY18 registering a 32 per cent growth in exports contributed by 25 per cent increase in realisations and 7 per cent increase in volumes. This comes after a three year consecutive decline in basmati exports till FY2017 (Rs 21,605 crore). In the past, despite the volumes holding firm, the exports have been adversely impacted by pressure on realisations (from peak of Rs 77,988 a tonne in FY2014 to Rs 54,011 a tonne in FY2017), driven by lower demand in the global market as well as lower paddy prices over the procurement seasons of FY2015 and FY2016.
Gurnam Arora, Joint Managing Director, Kohinoor Foods Ltd, said, “Basmati rice is likely to remain firm this year on lower output estimates.”
An Icra report said that basmati rice exports in the current fiscal have been encouraging, especially driven by demand from Iran. The Middle Eastern countries are the biggest importers; and also a source of volatility in demand. Demand from Iran, the second largest importer has been fairly volatile, primarily on account of import bans imposed from time to time. In Q1FY2018, Iran has been the primary contributor to growth in industry exports – contributing around 40 per cent to the total. However, from August 2017, Iran has again discontinued importing Basmati rice from India.Resumption of imports by Iran, which is anticipated around the procurement season, would be critical for the overall demand for Basmati rice. Any delay in the same could dampen the paddy procurement in the upcoming season as well as subdue the exports outlook for H2FY2018 and FY2019. This is especially material in the light of decline in volume sales from other key market - Saudi Arabia (13 per cent of total exports in Q1FY2018 as against 20 per cent in FY2017).
On the supply side, during the last procurement season of October-December 2016, basmati paddy prices had firmed up by 20-25 per cent across varieties, on the back of relatively lower production.
Meanwhile, the demand concerns in the form of Iran import ban and sluggishness from other key geographies would be overcome and export volumes in FY2018 to be around 4.1 million tonnes (4 per cent higher than FY2017). In addition, higher paddy prices in the last procurement season and likelihood of firm prices in the upcoming procurement season are expected to push up the average realisations in FY2018. As a result, export value is expected to grow to around Rs 26,000 crores in FY2018, a jump of 21 per cent over FY2017.
Meanwhile, India’s basmati rice output is estimated to have declined by over 18 per cent to eight million tonnes (mt) for 2016-17, compared to 9.8 mt the previous year.
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