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Weak prices, low export demand to hit basmati area

 

Cogencis, Friday, May 29

By Sampad Nandy

NEW DELHI – In the coming kharif season, basmati rice acreage is likely to shrink nearly 10% on year as a drop in prices and grim prospects of exports are seen discouraging farmers from sowing the premium-quality crop, sources said. 

In 2019-20 (Jul-Jun), the area under the crop was 1.9 mln ha, compared with 1.5 mln ha the previous year. Production stood at 5.7 mln tn, up 15% on year

Though Prices Have Recovered To 3,100-3,200 Rupees Per 100 Kg, Farmers Are Apprehensive Due To Expectations Of A Fall In Exports.

"The acreage under the crop had risen since farmers were hopeful of higher returns on the crop. But prices of the crop fell sharply as exports during the initial days declined due to ambiguity over the exports to Iran," said an official with a basmati trading firm. 

When the crop had hit markets in late October or early November, prices of the 1121 variety of basmati fell to a near-two year low of 2,650 rupees per 100 kg. Farmers were forces to go for a bad bargain, and sell at depressed prices, the official said. 

Though prices have recovered to 3,100-3,200 rupees per 100 kg, farmers are apprehensive due to expectations of a fall in exports, traders said.     

"Weak exports had hit prices of the commodity in spot markets and also the sentiment in the market," Amritsar-based trader Ashok Sethia said. 

India's basmati exports in 2019-20 (Apr-Mar) are estimated to have fallen nearly 5% to 4.2 mln tn, industry sources said.

And, traders expect exports to fall further in the coming days due to changes in the Iran's import pattern. The West Asian country recently withdrew the subsidies it provided on import of rice and this may lead to a fall in import demand from the country, Delhi-based trader Anand Goyal said.

Amid the lockdown to contain the coronavirus pandemic, restrictions on movement are also seen hitting exports during the next few weeks, he said. 

"Indian basmati rice exports to Iran and Europe are facing hurdles. Iran has been hit by the pandemic, apart from US sanctions. Now, the biggest problem with Iran is the availability of funds," KRBL Ltd Chairman and Managing Director Anil Mittal said.

Earlier, Iran was the largest importer of Indian basmati and accounted for almost a third of such exports from India in 2018-19. In 2019-20, its share fell to a fourth due to economic sanctions imposed on the country by the US.

The sanctions, imposed in November 2018, were aimed at curtailing Iran's crude oil exports. In 2019, receipts against Indian exports were adjusted against the payment for import of crude oil from Iran. However, the window was closed in May after India had to stop import of oil following the US sanctions. 

Now, the funds available in escrow accounts of Iran in India are as low as 20-30 bln rupees, against 160-200 bln rupees about a year ago, Mittal said. The depleting funds have turned Indian exporters wary of delayed payments for basmati shipments, industry participants said.   

Apart from Iran, shipments to the European Union, another key export market, are also seen declining due to strict pesticide norms pertaining to basmati, Sethia said.

That apart, scarcity of labour in Punjab and Haryana may make it difficult for these states to start sowing both the basmati and non-basmati varieties, Sethia said.

In the first few months of the current financial year, exports of basmati rice are seen falling around 5% on year due to the economic fallout of the COVID-19 pandemic. A drop in acreage is also likely weigh on exports of basmati, which account for nearly a fourth of India's agricultural exports.

In 2018-19, the value of India's overall farm exports was at 1.3 trln rupees, of which basmati accounted for nearly 330 bln rupees.  End

Edited by Avishek Dutta

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