Rice exports hit the $2bn mark again


THE country recorded around $2 billion worth of rice exports in the fiscal year ending in June after remaining below this level for two years, say senior officials of the Trade Development Authority of Pakistan (TDAP).

Rice exports had reached $2bn for the first time in fiscal year 2015. Officials of TDAP claim that the country has achieved the target of 4 million tonnes and export earnings of $2bn. But official statistics of exports for the outgoing fiscal year would be out in the third week of July.

According to the Pakistan Bureau of Statistics (PBS), Pakistan exported 3.84m tonnes of both basmati and non-basmati rice for $1.89bn from July 2017 to May 2018. Historically, rice exports remain high in volumes in the second half of our fiscal year, ie from January to June, due to the fact that the rice marketing year begins from October.

This trend remained visible in fiscal year 2017-18, too. Export earnings increased accordingly in dollar terms but they meant more for exporters in terms of local currency due to the 10 per cent depreciation of the rupee against the US dollar.

The rupee came down from 110.42 a dollar on Dec 30, 2017 to 121.50 on June 26, 2018 in the interbank market as Pakistan failed to fix its massive current account deficit.

“Unless share of basmati in overall rice export volumes is increased to 20-25pc in coming years, growth in rice exports earnings might remain just moderate despite all aggressive marketing,” fears a top official of TDAP

TDAP officials say that the rupee depreciation and the State Bank of Pakistan’s (SBP) stricter vigil on trade dollar movements also have led to the faster realisation of export proceeds of all items including rice.bd-rice-2

They offer this argument to support the claim that rice exports hit $2bn a few days before the end of June from $1.89bn at the end of May, showing a build up of $110m in less than a month. After hitting $2bn in FY15, rice exports had fallen to $1.86bn in FY16 and then to $1.61bn in FY17.

This was due to insufficient exports of high-priced basmati varieties, low average per tonne export price and an inability of the exporters to sustain market share in some key export markets including China, Oman and the United Arab Emirates.

High domestic prices of rice during these two years amid tough competition in the international market and consequent decline in export margins had also dampened the spirit of our exporters, especially those engaged in bulk shipments of unpackaged rice.

But in FY18, things improved on almost all fronts. Out of the top 20 export markets, shipments to 14 of them during ten months of FY18 recorded a rising trend. In some cases export earnings more than doubled.

Exports to half a dozen of them, however, showed a declining trend, according to SBP figures. A real achievement would be exports rising beyond $2bn at a double digit rate for years to come, officials of TDAP insist.

Exporters say that for that to happen, milled rice production must also grow to continue to create enough export surplus. Pakistan’s milled rice output has been growing but remains below 8m tonnes, a level that the exporters think is crucial given a rising trend in local consumption of rice.

Water shortages, increasing domestic demand for export-crucial basmati varieties, and imports of an inferior quality hybrid paddy seeds amid a lack of large-scale initiatives to promote water-efficient rice cultivation are some key impediments to sustaining growth in exports.

During the outgoing fiscal year, exporters not only fetched huge orders from a number of countries, including even the rice-exporting Indonesia, but also managed to sell rice at a higher value per tonne taking advantage of stable market prices and focusing on exports of branded rice in consumer packaging.

Average per-tonne export price of basmati rice in 11 months of FY18 rose to around $1,040, up from below $950 a year ago, officials say, adding that average export value of non-Basmati varieties also rose to $417 per tonne from $377 per tonne.

This is partially attributable to a rise in international prices fuelled by a higher demand, but also to the fact that several Pakistani rice companies, including Matco Foods, invested in the processing and packaging of rice to fetch high export revenue, market watchers add.

Exporters and officials agree that for sustaining growth in export earnings of rice, increasing the share of higher-priced basmati varieties is a must. Currently, this share is just 12pc and has historically ranged between 10 -15pc.

“Unless share of basmati in overall rice export volumes is increased to 20-25pc in coming years, growth in rice exports earnings might remain just moderate despite all aggressive marketing,” fears a top official of TDAP. That is where investment in rice research counts.

But as local consumption of premium rice has also been rising steadily, the pace of growth in production needs to be accelerated further. Officials say that this will not be possible without greater investment in research and collaboration with international rice research agencies

Categories: Business

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