Basmati rice exports to miss target as prices rally

India, the world’s largest producer of aromatic basmati rice, may miss a target to boost exports by 25 per cent this year as a rally in domestic prices curbs demand from buyers in Europe and the West Asia, a trade group said.

Shipments of the grain, which can fetch about double the rate of traditional white rice, may total 3.5 million tonnes in the year ending March 31, less than the four million tonnes forecast in August, M P Jindal, president of the All India Rice Exporters’ Association, said in an interview on January 28. Exports were 3.2 million tonnes in 2011-12, he said.

Prices in India rallied 38 per cent this year after the government raised rates for the non-basmati variety to a record, potentially hurting earnings at exporters such as KRBL Ltd, Kohinoor Foods Ltd and LT Foods Ltd.

Farmers may boost planting to benefit from the surging cost of the grain used to make dishes, including biryani, potentially doubling the harvest and increasing exports, said Vijay Setia, a former president of the association. “Buyers are placing smaller orders because of higher prices,” Setia said in a phone interview. “I don’t see improvement in exports this quarter.”

The average price of basmati has climbed to $1,100 a tonne from $800 a year earlier, said R.S. Seshadri, a director at Tilda Riceland Pvt Ltd, a New Delhi-based exporter. Benchmark 100 per cent grade-B Thai rice costs $616 a tonne.

Basmati paddy production may double next year from 5.7 million tonnes in 2012-13, Setia said. Exports were 2.5 million tonnes in the nine months ended December 31, compared with 2.2 million tonnes a year earlier, he said.

India, Pakistan
India controls 65 per cent of the overseas basmati market, according to the state-run Agricultural and Processed Food Products Export Development Authority, while Pakistan, the only other main producer in the world, accounts for the rest.

The aromatic rice variety, specific to a geographic region, is cultivated in the states of Haryana, Uttar Pradesh and Uttarakhand in India, and in Punjab that straddles both the South Asian countries.

Saudi Arabia and Iran are two major buyers of Indian basmati. The US, Europe and Africa also purchase the grain. India’s rice exports including the non-basmati variety, are set to to drop 23 per cent to 8 million tonnes in 2012-2013 from 10.4 million tonnes in 2011-2012, according to the US Department of Agriculture. Production may fall to 99 million tonnes from 104.3 million tonnes, according to the agency.