Amid weak prices of agri commodities, robust rice demand bucks the trend

The price of rice has been ruling high, mainly on robust exports, demand from mills, and the entry of traders who lost in other commodities like oilseeds and pulses

Even as rural India reels from the impact of a sharp decline in the prices of several farm commodities, rice seems to have outperformed major agriculture goods, driven mainly by good export demand, a decline in kharif output and heightened stocking by traders and dealers.

The price of common variety rice has risen by almost 14.5 per cent in the wholesale market over the past year, a phenomenon different from what has been seen in other agriculture commodities, reveal data sourced from various agencies. In the past five months alone, the price has risen by nine per cent.

While export demand is likely to keep prices at an elevated level, higher procurement and stock position with state-run agencies – which is better than last year – could act as a cushion.

“This season has been good for rice, as exports have improved for all varieties, including basmati. Exports to Bangladesh have triggered a higher demand,” said Devendra Vora of Friendship Traders, based in Mumbai’s APMC Vashi.

According to Agriculture and Processed Food Export Development Authority (Apeda), exports to Bangladesh have seen a revival of sorts. Compared with 30,572 tonnes in April-November last year, they have crossed one million tonnes in the first 8 months of this financial year.

The governments of Bangladesh and India had last year agreed on exports of parboiled rice to Bangladesh (on a government-to-government basis), as that country was facing a shortage of 1.5 million tonnes. After Bangladesh reduced its import duty to two per cent, private traders there also started importing rice from India.

Both Basmati and non-basmati varieties have seen a sharp jump in overall exports, with Basmati (especially 1401 and 1121 varieties) witnessing a price realisation increase of 26.8 per cent in the export market. Looking at the opportunity, Indian farmers have this Rabi season so far sown rice on 633,000 hactares more area than last Rabi season. Rice sowing has reached 2.23 million hactares this season.

In the global context, the prices of rice are rising in Thailand and Vietnam as well, on prospects of exports to Indonesia and Philippines, respectively.

“This season, several traders from North India have shifted to buying rice, as they had been incurring losses in most other agricultural commodities like pulses and oilseeds,” Vora said, adding that rice mills and traders had also stored paddy at the start of the season when the prices were lower. Paddy for long grain was quoting at Rs 2,100-2,200 per quintal at the beginning of the season which led to a milled basmati rice price of Rs 5,100-5,200. Common grade paddy was at Rs 1,400 per quintal.

Experts attribute the price rise to higher demand, higher procurement and an estimated drop of 2 million tonnes in kharif rice production to 94.5 million tonnes. Private estimates show that the loss could be compensated by a higher-than-expected rabi rice production, estimated at 14.76 million tonnes, as against 13.76 million tonnes last year.

Rice production in the kharif season, according to the first advanced estimates, is projected at 94.50 million tonnes, against 96.39 million tonnes during last kharif season, mainly due to a drought in some parts of the country.

The stock position with the Food Corporation of India (FCI) is also at a comfortable level. Latest data show that FCI has rice stocks of around 35.76 million tonnes in January (to date), which is 31.3 per cent more than in the same period last year.

On top of that, procurement of ‘paddy in terms of rice’ has also been good this year. According to latest data from the department of food and consumer affairs, 27.43 million tonnes of ‘paddy in terms of rice’ had been collected by state agencies till January 21. This is 25.57 million tonnes more than last year.

A big increase in rice procurement among non-traditional states has been in Uttar Pradesh, where procurement till January 21 has risen by 108 per cent to 2.43 million tonnes, and Odisha, where it has increased by 67 per cent to 1.52 million tonnes.

In Punjab and Haryana, which are traditional big states in terms of rice procurement, purchases this year till January 22 have been 11.83 million tonnes, as against 11.04 million tonnes last year.