Paddy Rice Prices Decline Improving Export Prospects

Rice prices have experienced a record hike of nearly 90 percent in the last year due to the devastating floods that erased nearly 1.9 million tons or 80 percent of the expected crop production in Sindh alone.

Rice is the second biggest staple with an annual consumption of more than 3.7 million tons but according to the monthly CPI figures released by the Pakistan Bureau of Statistics, Basmati Rice prices have increased by 89.97 percent while IRRI-6/9 varieties have also experienced an 82 percent rise in prices.

In addition to the devastating floods, the record rise in the cost of production at both the farm and miller levels is also a major contributor to the price rise that has been only second to the rise in flour prices in the inflation basket though the trend may finally shift.

Paddy prices have declined sharply across Punjab losing nearly Rs. 1,500 per maund in the case of the Basmati 1509 variety during a month since new crops from the South have also started to arrive in the markets.

Prices in grain markets across Kasur, Sahiwal, Bahawalnagar, Jhang, Multan, Sheikhupura, Gujranwala and Faisalabad have declined from Rs. 5,300 per maund to nearly Rs. 3,800 per maund as Pakistan is set to reap the second-biggest rice production of 9 million tons in history due to increase in cultivated area.

“Prices had risen significantly also due to anticipated rise in exports after the Indian ban on exports and setting a floor price on Basmati shipments while the rise in international prices drove people to buy more. But the crop of Southern Punjab arrives late in markets and that has been primarily driving the prices down” stated a market consultant while talking to ProPakistani.

He added that the recent crackdown on smuggling to Iran and Afghanistan is also a major factor due to which prices may not go up before the start of next month.

While consumers may find relief with an overall improvement in food security, the decline in prices is serious trouble for the farmers who may have to hold the release of their crop to the market to ensure the right prices. Rice has really high cost of production but on the other hand, the decline in prices may bring a sigh of relief for the exporters.

Pakistan’s rice exports contribute significantly in bringing foreign exchange critical for the economy but they experienced a decline of 14.47 percent during FY23 in dollar terms and more than 25 percent in volumes due to the reduced production. But this year, the industry is aiming for a record annual export of nearly $3 billion due to the record production.

What India's Rice Export Ban Means for Pakistan?

India has consistently outperformed Pakistan in the global rice market, thanks to lower production costs and a more efficient value chain. Even with a nearly 20 percent duty on non-basmati rice exports before it put an outright ban on the trade of the commodity, India’s prices remained lower than Pakistan’s on the international stage. Pakistani growers have struggled with the rising cost of inputs in a vicious cycle of inflation that was fueled further by the smuggling and hoarding of agricultural commodities.

“It is a good omen for the exports if the prices come down because that has been a significant bottleneck traditionally while competing against India in the international market and the situation has only worsened for exporters with record high interest rates,” stated Amit Kumar, a Rice Trader from Karachi while talking to ProPakistani

He added that the consumers may also get some relief as purchasing power has reduced significantly during the past year or so due to the record food inflation of the most basic commodities and people have been struggling to buy rice for their everyday use. He said that while farmers may struggle in the short term if the government can sustain the effects of these administrative measures, it will benefit everyone in the long term.

On the other hand, India recently decided to cut the floor price for the Basmati rice exports followed by the news that the world’s biggest rice exporters have achieved the domestic production targets. India is also expected to review the ban on non-basmati rice exports this week and there are some chances that it may lift the restrictions in light of recent developments which will bring more challenges for the exporters.

The problems of Pakistani farmers extend across the whole supply chain from the lack of seeds to the non-existent processing infrastructure and lack of SMEs near farm gates.

On the other hand, recent administrative measures against black markets, smugglers and hoarders have come at a time when all big crops from the Kharif season including Rice, Cotton, Corn and soon Sugarcane are about to hit the market. While there is no doubt about how critical these measures are, farmers are complaining

It is essential that these measures also ensure any illegal hike in prices of agriculture inputs and are followed by larger reforms in agriculture markets and research & development because unless the actual cost of production can be reined in, neither exporters, farmers nor consumers can expect a substantial relief.

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