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Trends in Asian Rice Industry

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Author:
Salman Qazi

Price Variation in Commodities

Commodity industry has always been very unpredictable with respect to demand and prices. Despite of predictions by veterans of the industry, prices vary on a greater scale. Every individual is familiar with the demand and supply gap that is considered to be one of the most price changing factors in commodity market. Secondly, prices are not solely dependent on demand and supply, but rice prices are also affected by natural disasters and climate changes. Rain is crucial determinant for agricultural crops especially rice crop needs plenty of water to grow. According to Dawn newspaper 2012, rice production in Pakistan was affected badly by rain. Due to late start of monsoon rain in Pakistan, the farmers could not harvest the rice crop in the month of September which caused a delay in rice exports.

 



The picture illustrates US 100 dollar bank note taken in August, 2011. Source: New Indian Express

 
Market at a Glance

US Dollar & Currencies

Digging into the current situation of the rice market, the global prices of white rice are facing a decline. There are several reasons behind the shrinking of prices. According to Oryza, US stock markets weakens due to decrease in global oil prices. Consequently, US Federal Reserves raise interest rates that lead to a strong US dollar against currencies. Dollar appreciation and depreciation impact on Asian countries and their exports on a greater scale as most of them are solely dependent on agriculture.  

 
Above graph explains about the trend of global rice prices on semi-annual basis. Source: Oryza

 

Price Trends & Market Situation

Thailand

One of the top 3 rice exporters in the World, Thailand faces straight $10 decline in per metric ton rice prices in comparison with last week’s prices. The prices were $5 up comparing to last month and $45 up in comparison with last year. Due to drought conditions, first rice crop production (Jan-June) 2015 dropped to half.

Vietnam

Vietnam is the second largest rice exporter in the World. The country is rich in agriculture and is also a 7th largest consumer of rice. Veterans of the industry forecast that infringement of salt water will affect state’s rice production thus its exports. MARD – Vietnam’s Ministry of Agriculture and Rural Development has warned about drought and water infringement that can cause a noteworthy decrease in rice crop 2016. As far as the prices are concerned, Vietnamese rice is traded $5 low than last week’s and $10 low than last year’s prices.

 

A farm worker carrying fodder walks in a dried paddy field on the outskirts of Ahmedabad, India, September 8, 2015.Soruce: in.reuters.com


India

India has a big name in rice exports as country has reached target of 104.32 MTs in 2011-12 (July to June crop). With more than 36 varieties of rice, India has allocated its largest area for rice cultivation. If we talk about prices, Indian rice industry does not seem to be the same. The prices remain unchanged when compared to the last week but were bit low $30 from the last month prices. As far as the production volume and exports are concerned, there was 10% decline in the rice exports as compared to last year. According to Indian rice export authorities 2015-16 (July to June) rice production will also decline to 2% and will make the total production output to 103.61 MTs.

India is looking forward to lock a one million dollar deal with Indonesia. Despite of its positive outcomes, deal has some negative results too. Industry dealers have started to speculate basmati rice to cope up with future rice shortage as they are familiar with ongoing dry conditions in the country. This will likely increase shortage and prices in local market. Just to ensure quality standards, the Agricultural and Processed Food Products Authority has bounded all Indian rice exporters (that export to USA) to register with India’s plant quarantine organization.

Pakistan

Pakistan is an agricultural economy and the 11th largest rice exporter in the World. Production totals to 6 million tons and country grows 30 varieties of rice. Pakistani rice production has been increasing. According to a newspaper Pakistani rice exporters hold 6 million tons of rice. According to Rice Exporters Association of Pakistan – REAP, Sri Lanka grants duty free access 82 Pakistani food products which includes Pakistani Basmati rice. Both countries are interested to sign a FTA – Free Trade Agreement. According to Dawn, the trade between both countries is estimated around 325 million USD but both countries have agreed to escalate it to 1 billion USD annually. Political stability in Pakistan will expedite the trade process to maximum.


Prime Minister Nawaz Sharif (R) witnessing agreement signing ceremony between Pakistan and Iran. Source: Express Tribune

Lifting Iran sanctions has opened a window of new opportunities for the World market. Pakistani basmati rice has a lot of demand in Iran. There are several deals in the pipeline that are expected to bring million dollars to Pakistan and Iran. Such deals will not only facilitate Pakistan, but will also save freight cost to Iran as both countries share marine borders. State Bank of Pakistan has directed all banks to commence trade activities with Iran smoothly. Federal Minister of Commerce, Khurram Dastagir expressed his interest towards signing a FTA between both countries.



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