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Upcoming rice crops likely to push Pakistan’s export to EU countries

Basmati exporting countries to EU to bring down MRL level for Tricyclazole to 0.01 mg per kg from Jan 1, 2018
Pakistan can enhance its rice export to EU from 150,000 ton to 350,000 ton

Pakistan’s rice exports witnessed a decline of around 14 percent during the last fiscal year due to lack of research and non availability of new seeds. In Pakistan rice was the second largest foreign exchange earning commodity with $2 billion exports, however, at present it ranks fifth as the rice trade is facing severe crisis and exports continue to decline.

The future of rice exports depends on the upcoming crop. The crop achieve higher yield in this year than some increase is expected in exports. According to exports statistics, Pakistan’s overall rice exports posted a 13.63 percent decline during the last fiscal year 2017. Pakistan rice exports stood at $1.607 billion in July-June of fiscal year compared to $1.86 billion in same period of fiscal year 2017, revealing a decline of $253 million. In term of quantity, rice exports posted a 17.13 percent decline in July-June of fiscal year 2017 compared to the same period of last fiscal year.

Pakistan exported some 3.519 million tons rice (Basmati and non Basmati) during the last fiscal year against the 4.246 million tons a year earlier. During the period under review, basmati rice exports fell 3 percent, while non basmati rice exports declined sharply by 17 percent.

Government’s policies had directly hurt the rice exports as Pakistani rice was costly in international market due to high input costs, overvalued currency and excessive taxes on rice sector. During the last fiscal year, the country’s rice crop achieved a low yield due to lack of research and unavailability of new or quality seeds. Rice crop size was less than expectation and broken quantity was over 40 percent as against standard ratio of 25 percent during the last season.

High input costs had made Pakistan basmati rice completely uncompetitive in the world market particularly with the Indian basmati rice. The government had not fulfilled its commitment. The rebate that was granted to other exports was not given to the rice sector.

Pakistan’s edge over India

From January 1, 2018, all countries that export basmati rice to the EU must bring down the maximum residue limit (MRL) level for Tricyclazole to 0.01 mg per kg. Up till now, the EU was accepting 1mg per kg from different countries, including India.

Pakistan can enhance its rice export to EU from 150,000 ton to 350,000 ton, grabbing the share of 200,000 tons of Indian rice exports to EU which may be stopped due to strict regulations. Tricyclazole is a fungicide used by Indian farmers in more than 70 percent of basmati crops. Pakistan’s farmers do not use such chemicals to protect their crops. Basmati varieties grown in Pakistan do not require use of the fungicide and stand to gain from the de-facto ban on Indian exports. India had exported rice of around 350,000 tons worth $260 million to the European Union countries in last financial year, 70 percent of which has tricyclazole limit of 1mg/1kg.

The government must announce matching grant to shelve Pakistani product at the international store chains. Pakistan’s brand can get space by replacing Indian basmati rice in European countries’ renowned mega stores with the financial support of the government.

Good market with neighbours and others

Iran is an important and lucrative basmati market for Pakistani exporters and Pakistan can export 0.5 million tons basmati to Iran. Despite lifting of the US sanctions still banking channel had not resumed between the two countries.

The government should take concrete steps to increase the production of rice by introducing the farmers’ new hybrid seeds, etc, so that farmers can achieve higher yield.

Pakistan can capture India’s million rice business with the European Union following the EU’s zero tolerance on Tricyclazole chemical found in Indian grains. Pakistan can target India’s basmati rice share in the EU market, following the severe policies placed by the European Union on the presence of perilous pesticides in the commodity.

The government is urged to extend financial support to the second biggest exporting sector in line with other export-oriented industries enabling them to be price competitive in the international market to bridge the ever increasing gap of trade deficit of the country. Rice being the second biggest exporting sector after textile is was always ignored by the government.

Pakistan has a huge potential of rice export but its exporters should pay attention towards meeting the specifications of their importers. Rice export to European countries was picking up but the exporters should pay attention towards issues like aflatoxins, pesticide residue and also new regulations being made by these markets. It should be remembered that complaints of aflatoxins in rice consignments from Pakistan had reduced to almost negligible level.

Rice exports have started the current fiscal year giving rise to hopes that the full-year proceeds will hit $2 billion after a gap of two years. The country’s rice exports jumped 40 percent year-on-year to $224 million in the July-August period, according to the Pakistan Bureau of Statistics.

Basmati rice exports rose more than 10 percent to $63 million during the two months despite a negligible increase in the volume, which rose 0.4 percent to 59,433 tons.

Some exporters are reestablishing their brands by improving quality of processing and packaging while others are switching over from shipping large quantities of loose coarse rice to exporting it in wholesale or even retail packaging.

However, exports of non-basmati varieties saw a big rise of about 47 percent to 369,560 tons during the period. Accordingly, export earnings surged 57 percent to $161 million.

Higher per-unit price could give further edge to Indian exporters, who have already grabbed more than 70 percent share of the Saudi rice market and are increasing their share in other Gulf Cooperation Council countries as well. As for non-basmati or coarse rice varieties, their exports are growing for several reasons, including higher production of rice in 2016-17 as compared to 2015-16.

Moreover, exporters are reaching out to new markets. Some of them are re-establishing their brands by improving quality of processing and packaging while others are switching over from shipping large quantities of loose coarse rice to exporting it in wholesale or even retail packaging.

 

Besides, the use of online trading portals for client searching is also picking up pace. “Rice exports in this fiscal year can hit 2 billion mark again (as they did in fiscal year 2015),” says an official of the Trade Development Authority of Pakistan (TDAP).

Recent efforts to mobilize foreign missions in helping exporters grab a larger share of traditional rice markets and explore new ones have also started paying off. In the last fiscal year, Pakistan produced 6.85 million tons of rice, up from 6.8 million tons in fiscal year 2016 but still short of the 7 million tons mark achieved in fiscal year 2015. This has eased pressure to some extent on prices of exporters-driven purchases, and many of them are able to export more during this fiscal year than they did in the last year.

Exporters also hope to partly regain the lost ground in Saudi Arabia, where rice exports declined to $54 million in fiscal year 2017 from $83 million in fiscal year 2016.

Some other exporters say that regaining lost status in Afghanistan (where Pakistan’s rice exports slumped to $77.5 million in fiscal year 2017 from $128 million a year ago) and China (where exports plunged to $105 million in fiscal year 2017 from a peak of around $277 million a year ago) is crucial if Pakistan want to hit the $2 billion mark in rice exports in fiscal year 2018.

In case of Afghanistan, political tension between Islamabad and Kabul, and repeated closure of border trade are blamed by exporters for decline in exports of not only rice but of other commodities as well.

Rice exports to China suffered last year mainly due to depressed demand there, though inefficient marketing and logistics issues also had a hand in it.

In the last three months, Pakistan has received orders from both countries. It is expected exports to Afghanistan and China will increase this year. Rice exports to Kenya rose to $198million in fiscal year from $184 million a year earlier.

During the previous fiscal year, Pakistani exporters penetrated into such non-traditional markets as Nigeria, Philippines, Sierra Leone, Somalia and Thailand, which itself is a big rice-exporting country. Combined earnings from these markets totaled about $80 million.

Besides, rice exporters are also making efforts to sustain markets like Kenya, Chile, Denmark, Djibouti, Haiti, Kazakhstan, Madagascar, Mauritania, Mauritius, Niger and Zimbabwe, where their exports saw phenomenal growth in fiscal year 2017.

Pakistan’s rice exports to Indonesia got a boost in January last year when the two countries signed a deal to enable our exporters to ship $400m of rice in four years. Under that agreement rice exports to Indonesia are going on and during this fiscal year we may fetch $50 million to $100 million depending upon Indonesian requirements.

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