Basmati market getting hot

Prices have been rising steadily because of lower harvest and export demand

If wheat is a ‘happening’ market in India, rice can be termed as its relatively quiet cousin. Unlike wheat, rice has not witnessed much volatility or tightening of market fundamentals, thanks to a geographically-spread, large production base and government procurement of a third of the annual output for buffer stocks and welfare programmes.

To be sure, India is the world’s second-largest producer of rice, next only to China, and in recent years has become the world’s largest exporter of the fine cereal, relegating its nearest rival Thailand to the second spot. Other exporters include Vietnam, Pakistan and the US. In the last three years, volumetrically, export shipments from India have fluctuated.

The premium rice grown in the foothills of the Himalayas — aromatic long grain known as Basmati — is, of course, much sought-after in the export market, while other varieties (non-Basmati rice) also enjoy a decent share in the shallow world rice market of about 40 million tonnes, representing around 8 per cent of world production.

India situation

While our rice production has remained consistently above 100 million tonnes, hovering around 105 million tonnes, official procurement has been in the region of 30 per cent of production.

For 2016-17, the target for rice procurement is 38 million tonnes, comprising 33 million tonnes for the kharif season and the rest rabi season. Procured paddy is converted into rice through a system of levy imposed on private rice mills.

Rice procurement is a key element of the government’s food security policy and thus impacts the national rice market. Purchases are de-centralised and the State government/its agencies procure, store and distribute rice within the State under the Targeted Public Distribution System, National Food Security Act and Other Welfare Schemes.

The excess stocks of rice procured by the State/its agencies are handed over to the Food Corporation of India in the Central Pool. The expenditure incurred by the State government on procurement, storage and distribution of such stocks is reimbursed by the Centre on certain laid-down principles. Thirteen States have adopted the decentralised mode of rice purchase.

Rice is an important agricultural commodity exported out of the country and generates $6-8 billion in foreign exchange. Aggregate annual shipments have been in the 10-11 million tonnes range of which the share of Basmati is 3.7 to 4.0 million tonnes and the rest non-Basmati varieties. Foreign exchange earnings from rice exports have begun to slow in recent years. While Saudi Arabia, Iran, the UAE, Iraq and Kuwait account for the bulk of Basmati rice sold from India, for non-Basmati varieties the major market is in Africa (Senegal, Benin, Ivory Coast, etc). Parboiled rice is preferred in these markets.


After an extended lull, since February, the Basmati rice market is seeing some action. Prices have been rising steadily because of lower harvest and export demand.

In the local market, rates have escalated by over 5 per cent to nearly ₹8,400 a quintal. This follows a spate of large export enquiries in addition to steady shipments of about 3.5 lakh tonnes a month since January this year. Iran and Saudi Arabia are said to be large buyers this time. But a firming rupee has not helped Basmati rice exporters.

It is estimated that in fiscal 2016-17, Basmati shipments would aggregate 4.0 million tonnes, largely unchanged from the previous year. Some exporters have forecast that Basmati rice may touch ₹10,000 a quintal in the weeks ahead. Futures trading in rice is not permitted.

The US imports about one lakh tonnes of Basmati rice from India; but the market is not without challenges. Indian Basmati rice continues to cause import alerts due to the presence of pesticide residues beyond maximum tolerance limits.

The author is a global agribusiness and commodities market specialist

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