The harvesting of basmati paddy (mainly grown in Punjab, Haryana and Western Uttar Pradesh) would commence from September last week and the traders are yet to exhaust the kharif 2014 stock.
Fall in realisations is also because of competition from Pakistan. After lifting of sanctions on Iran, Pakistan is also exporting to that country, though the overall demand from Iran has been low.
The competition among domestic exporters has triggered a price reversal.
Export prices have registered a drop of $220 per tonne this year and this indicates a fall of about 18 per cent over the last year. The average realisation per tonne of basmati rice was earlier close to $1,220, while the average value of contracts being registered currently with APEDA (Agri and Processed Food Products Exports Development Authority) is $950-1,000 per tonne. There has been no variation in basmati demand from importing countries but the prices have plunged due to excess supplies.
Lured by high returns of an average $1,295 a tonne in the international market for the basmati varieties, PUSA 1121 and PUSA 1509, the traders purchased every single grain from the farmers during the kharif 2013. The area under basmati cultivation also increased from 1.8 million hectare to 2.13 million hectare in the last two years, anticipating an upward trend in price. This resulted in over supplies and now the Indian basmati exporters are competing amongst themselves to clear their stocks.
Ashwani Arora, director LT Overseas (Dawaat Brand Basmati) endorsed the trend of fall in export prices.
“We are expecting a year-on-year growth of 15 per cent but this might not translate into same proportion in value terms as the prices have declined,” he said. Arora’s company registered an export turnover of Rs 1,300 last year but he is sceptical about retaining the same margins.
Pakistan is also emerging as a competitor after the lifting of US sanctions on Iran. This country accounts for 38 per cent of India’s Basmati exports. Although the availability of basmati and processing facility in Pakistan is limited but increase in Pakistan’s participation in global market can provide a choice to the importers can make a dent on the profits of Indian exporters.
The exporters have a cushion as the purchase price of basmati has also dwindled from Rs 4,000 per quintal in kharif 2013 to about Rs 1,600-1,700 per quintal in the current season.
A senior official in APEDA said that Indian exporters can retain the high price in the international market due to the unique qualities (aroma and length) of basmati but they need to invest in branding. The big brands are able to insulate themselves from price corrections, but unorganised players are likely to be more affected, he added.