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Basmati rice to remain costlier this year on lower output estimates

The price increase might hurt exports of this aromatic rice which remained a favourable choice for consumers in Iran, Saudi Arabia and European countries.

Dilip Kumar Jha  |  Mumbai 

Branded basmati sales to touch 2.9 mt

The prices of Basmati and rice are likely to remain firm this year due to estimates of lower output, following erratic monsoon in major growing regions. Data compiled by the India Meteorological Department (IMD) showed the country’s cumulative rainfall this season was 5 per cent lower than the long-period average (LPA), with the northwest region recording 11 per cent less rainfall until September 20. 

According to industry sources, lower rainfall in major Basmati paddy-growing regions not only hit the overall sowing area but also standing plants in the fields. The price increase might hurt the of this aromatic rice, 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 production in the current crop season, and thus the prices are likely to open firm in the oncoming procurement season,” said Deepak Jotwani, assistant vice-president,

Meanwhile, India’s exports have witnessed a rebound in the current fiscal year, with the first quarter of 2017-18 (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 FY17 (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 FY14 to Rs 54,011 a tonne in FY17), driven by lower demand in the global market as well as lower prices over the procurement seasons of FY15 and FY16.

Gurnam Arora, joint managing director, Kohinoor Foods Ltd, said, “is likely to remain firm this year on lower output estimates.”

An report said exports in the current financial year had been encouraging, especially driven by demand from Iran. The West Asian 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 Q1 FY18, Iran has been the primary contributor to growth in industry exports, contributing around 40 per cent to the total. However, from August, Iran has again discontinued importing from India.
 
The resumption of imports by Iran, which is expected around the procurement season, would be critical for the overall demand for

Any delays in the same could dampen the procurement in the upcoming season as well as subdue the exports outlook for H2 FY18 and FY19. This is especially important in the light of decline in volume sales from other key market - Saudi Arabia (13 per cent of total exports in Q1 FY18 as against 20 per cent in FY2017, according to the report. 

On the supply side, during the last procurement season of October-December 2016, Basmati prices had firmed up by 20-25 per cent across varieties, on the back of relatively lower production. 

Demand concerns in the form of Iran import ban and sluggishness from other key geographies would be overcome and volumes in FY18 would be around 4.1 million tonnes. In addition, higher 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 FY18. As a result, value is expected to grow to around Rs 26,000 crore in FY18, a jump of 21 per cent over FY17, it said.

India’s output is estimated to have declined by over 18 per cent to 8 million tonnes for 2016-17. An report said that 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 from India.

First Published: Thu, September 28 2017. 00:57 IST
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