Price Competitiveness To Boost Rice Exports From India in 2023

The major exporters of long-grained rice to the world market are India, Myanmar, Pakistan, and Vietnam. Currently, the prices for raw long-grained rice from India are hovering around 340-350 dollars on a fob basis, which is much less than other countries, giving Indian exporters an edge in African and Southeast Asian markets.

Lower costs drive exports in India over competitor countries

In the last few months, Myanmar and Pakistan were dominating the market and the rice from these countries was the cheapest. However, as of today, the price of rice sourced from Myanmar has increased to 385 – 400 dollars on a fob basis. There was unrest in Myanmar after the army coup in Feb 2021 weakening the export potential of the country. The domestic prices in the country increased due to the dislocation of transportation and banking services.

Thailand has changed course and moved away from long grain rice to perfumed jasmine rice, the export of which is guaranteeing good margins to the exporters of the country. And the country has ample reasons to do so.

Since 2019, Thailand has been one of the most expensive origins of white rice in Asia. The margins have impacted price competitiveness considerably since the second half of 2019, rising well above $100/mt in 2020. The reasons for a rise in prices of rice in Thailand are Government policies reducing farmer subsidies and lack of old crop stocks. The uncompetitive price of Thai long grain rice is expected to continue in the coming days and months, limiting the annual exports from the country.

International rice markets have not been particularly favorable to standard long-grain white and parboiled rice from Thailand. The exports of milled rice have been dwindling since 2018. Thailand’s milled rice exports in Dec 2020 was 4.2 million metric tons, which was down by 28% as compared to the previous year. The year-end total of 2019 was around 5.8 million metric tons which were down by 39% as compared to 2018. A significant percentage of exports from Thailand were specialty varieties for high-end markets, with the main export market being the US for several months in 2020 and continuing in 2021.

Vietnam has not been able to overcome last year’s shortage of rice. Exports from the region have dwindled and the prices are moving around 440-450 dollars.

Another market worth mentioning in this context is that of Pakistan. The country was exporting IRRI-6 rice a lot. However, the prices of a similar variety of rice from India are 20 dollars less than the rice sourced from Pakistan. In Pakistan, the cost is around 360 dollars with the comparative cost in India being 340 dollars on a fob basis. This difference in price has become detrimental for exports from Pakistan to a significant extent.

The rice exports from Pakistan both basmati and long-grained rice between July 2020 and May 2021 were 14 percent less as compared to that of the previous year. The country exported 3.3 million tons of rice in the 11MFY21 as compared to 3.87m tonnes during the same period last year.

The upward trend in Indian rice in global markets

The export of rice from India increased by over 33 percent in the first seven months of the current financial year (2021-22). According to the estimates of the Department of Commerce and Industry, the exports of rice in the current fiscal would surpass the volume of exports of 17.72 million tonnes achieved in 2020-21.

This rise in export is driven by the price competitiveness of Indian rice and robust global demand. The country is on a track to increase its rice exports footprint in the African, Asian, and European Union markets.

Price effect benefitting India

These shifts in buyer preference are dictated by price and buyers have the option to visit other markets when it comes to white and parboiled rice.

Prices of long-grained rice have remained competitive in India when there were hikes in prices in most other Asian countries due to panic buying and a reduction in production. This has been due to the availability of old crop stocks for export and also an increase in harvests in recent years. The Indian sector is also set to benefit from the recent demand from Bangladesh and China and dominate the standard long-grain sales in the coming months.

Agricultural exports to soar if logistical difficulties are overcome

Indian rice has been consistently cheaper as compared to the rice sourced from Thailand and Vietnam giving it leverage over other countries.

The acceptability of Indian rice in African, Eastern Asian, and Middle East markets is much better in comparison to Pakistan rice and Myanmar rice. Agricultural exports can ride on these favorable trends and accrue significant benefits in the next few months if the situation pertaining to freight costs and container availability improves.

India has to overcome major logistical difficulties to ensure the prompt shipment and make the most of the price competitiveness of its rice. This way, the buyers would not be motivated to pay a premium and opt for the high-cost rice from other Asian origins. The pace of Indian rice exports got a push with the Andhra Pradesh government allowing the use of Kakinada deep water port to be used for rice export by APEDA, exporters are awaiting ships currently.

It is the need of the hour for the Indian Government to intervene and resolve the logistics & shipment issues plaguing and hampering the Indian Export Industry. Container freights have begun to soften in the past few months, but the situation remains volatile and can worsen in case the spread of the Omicron variant is as rampant as predicted by experts.

Original Source: https://blog.tradologie.com/price-competitiveness-to-boost-rice-exports-from-india-in-2023/