Basmati paddy prices steady despite headwinds in global trade

Factors including low carry over stock and robust export in the last fiscal are buttressing price of basmati paddy as arrival of fresh harvest of Kharif season has begun in India, largest exporter of rice. The raw material prices are expected to be steady for the harvesting season ahead due to better quality of the crop and hope that the export will pickup in later part of current financial year.

The early maturing variety of basmati paddy is being priced at Rs 2600 per quintal in the prevailing market. The harvest of 1509 variety, consisting 35-40 per cent of basmati output, is likely to peak by next week in Punjab and Haryana, states that cultivate 75 per cent of the premium rice. “The current prices are comparable to last year when the low output and strong export had supplemented the demand,” says Ashok Sethi, director, Punjab Rice Millers and Exporters Association

This season the output of basmati is likely to increase in India as weather has been favorable in North for the crop and the acreage also has increased. Higher export in the last fiscal has left low carryover stock with traders and most are keen to replenish the cereal. It is likely to keep prices steady but the fact that global trade has recorded a negative growth of 9 per cent in the current financial year keeping traders cautious.

The price of basmati is a function of dynamics in global rice trade. The export market is facing headwinds in the current financial year but the buyers are taking a cue from robust export growth in volumes of 8.8 per cent notched in the last financial year. The average realization has also been strong due to currency devaluation and better international pricing due to low stock of premium rice in India and Pakistan.

Basmati export from India stood at record 44.1 million tonnes in 2018-19 compared to 40.5milion tonnes in 2017-18. In the prevailing market, farmers in Punjab and Haryana that produce 70 per cent of the cereal, are bagging up to Rs 2600 per quintal for 1509 basmati variety. The prices are comparable to the last season when they were firm due to low output in India and Pakistan.

Exporters are wary that shipments to Iran are stuck up at ports and only a few traders are taking the risk of delay in payments as the Gulf nation is not able to sell its oil due to the US sanctions. Out of 600 odd registered exporters, less than 24 are still engaged in export to Iran, fretted with inordinate delay in
payments due to the current turmoil.

“Indian government needs to tackle the hurdle in export to Iran and resolve impeding issues over Minimum Residue Levels with Europe, Saudi Arabia, Oman, Lebanon and
the US,” Vijay Sethia, president of the All India Rice Exporters Association said. Sethi said that the Indian government needs to impose regulation on manufacturers of pesticides and dealers to ensure judicious use of chemicals.

Indian traders feel that the procurement price of basmati will come down marginally as the crop arrival picks. “ The basmati harvest extends till November and if negative sentiments emanates from export market farmers will feel the pinch of low prices,” a Delhi based exporter said.