Spurt in domestic, export demand pushes basmati price by 10% in a month

Demand shot up sharply since start of Unlock 1.0 as Stockists rushed to fill their pipelines amid uncertainty in market operations over exploding number of Covid-19 cases

Basmati rice has become costlier by 10 per cent in June due to sudden spurt in demand from both domestic households and overseas markets post 70-day nationwide lockdown in India and and in other major countries to control pandemic.

The aromatic rice is currently quoted at $1,000-1,200 a tonne now from $900-1,100 a tonne towards the end of May. The value differs based on quality and brand.

Supply to domestic consumers and exports was interrupted due to transport disruptions during the nationwide lockdown. While the disruption was gradually eased with policy clarity emerging, the pipeline inventory exhausted during this period.

“Prices of basmati rice have gone up by 10 per cent or almost $100 in June from sudden emergence in demand from domestic as well as international markets. There has been a sharp jump in overseas orders despite increasing cases of Covid-19 across the world,” said Gurnam Arora, Joint Managing Director, Kohinoor Foods Ltd, the producer and exporter of Kohinoor brand basmati rice.

The benchmark basmati paddy spot price at Karnal compiled by the Indian Commodity Exchange (ICEX) jumped by 10 per cent to trade at Rs 3,623 a quintal on Wednesday from the level of Rs 3271 a quintal a month ago.

Interestingly, demand for basmati shot up sharply since the beginning of Unlock 1.0 on June 8. Stockists rushed to fill their pipelines amid uncertainty in market operations over exploding number of Covid-19 cases. Export orders have also increased from all across the world including Iran which faces United States-triggered economic sanctions and contributes nearly 25 per cent of India’s overall aromatic rice shipment.

“A number of new markets in the Far East and Latin American countries have evolved over the last couple of years to compensate the trade disruptions in Iran. Dollar availability remained scarce in Iran which affected India’s basmati rice to that country. But, we are getting good orders from other countries which is sufficient to cover the decline in exports to Iran,” said Arora.

Due to uncertainties in Iran over trade and commerce with any country including India, order flow from Iran is very low. Business with Iranian importers is risky, sources said.

Meanwhile, a number of importers in Iran had defaulted millions of dollars in the last few years. Triggered by massive defaults, Agricultural and Processed Food Product Export Development Authority (Apeda) had blacklisted two private basmati rice brands - Mohsen and Avazah - in February this year. These basmati rice brands were owned by traders in Saudi Arabia.

However, some, payment has started coming in of late from Iran. Also, the government of Iran has exempted basmati rice from any import duty and also discount to encourage imports. These will help exports to Iran to resume.

“There has been a sharp increase in domestic demand after relaxation in lockdown. Consumption in hotel, restaurant and catering (Horeca) segment was completely disrupted during the lockdown period, has also recovered now. All these factors have contributed to 8-10 per cent increase in the prices of basmati rice,” said Ashwini Arora, Director, L T Foods, the producer of Daawat brand basmati rice.

Apeda reported India’s total export of basmati rice at 3.8 million tonnes valued $3.8 billion for the financial year 2019-20 (upto February 2020) versus 4.4 million tonnes worth $4.7 billion reported for the previous full financial year (i.e. 2018-19).