WILL RICE EXPORTS CROSS $2BN MARK?

TARIQ AHMED SAEEDI
Dec 7 - 13, 2009

While rice exporters are hopeful that they can achieve rice exports' target of $2.2 billion of this year, there are also skepticism echoing in the circle of rice exporters who think it is not possible given the decline of exports in the first four months of this fiscal year, which means that demand in international market is contracting. For some, decline in exports is attributed to misplaced procurement drive, which is benefiting intermediaries and hoarders only.

According to some rice exporters, this year's rice export target is overambitious. Former vice chairman rice exporters association of Pakistan (Reap), Abdul Baseer says the rice exports will get no more than $1.25 billion this year owing to slack in demand in international market. Situation will be clear in April next year, he adds. 'However, the target set for this year is overambitious,' he tells this scribe. If India jumps in to the international market with non-basmati rice, the situation for Pakistan's rice exports will get worst further, he believes. Price of IRRI-6 has declined in international market. 'Maybe, prospect turns out to be good in 2010. When present chairman and vice chairman Reap was contacted several times on telephones to get the Association's viewpoints, they declined to comment, and vice chairman Rafiq Suleman excusing the person he arranged for media comments had gone. In a press report, vice chairman Reap expressed his hope that Pakistan would achieve $2.2 billion rice exports' target this year.

However, in the first quarter of current financial year, rice exports declined 35 percent to $399 million over $621 million in the same period last year. In October also, exports did not improve over the previous year's figure. In Jul-October 2009, total rice exports were recorded at $513 million as against $702 million in the corresponding quarter of 2008-09. During FY09, rice exports brought 1.76 billion US dollar home.

Rice production is good and carry-over stocks are in sufficient quantity, thus "there is no doubt over exports hit the target", suggests a leading rice exporter from Lahore over telephone. Former chairman Reap, Mohammad Azhar sees no problem in exports in future. Giving an estimate on the total stocks of rice available in the country, he puts the figure around 8 million tons. 'But, what we have is experiencing dampened demand of buyers in international market,' he observes. 'It is time we shift to new technology for rice making.' He says Pakistan hinges on traditional ways of rice production and producing white rice, demand of which is being slackened in international market. 'There is a need to shift to parboiled rice to sustain market share in the wake of fierce competition in the international market.'

Procurement of paddy has almost kicked off and State Bank of Pakistan is facilitating rice exporters to undertake procurement operation free from monetary restraints as the central bank is providing 100 percent financing facility to rice exporters for 270 days. Earlier, it is worthwhile to recall that rice exporters needed to repay credit in 180 days. Rice exporters appreciate this incentive to spur growth of rice exports.

Exporters criticized the procedure of Pakistan Agricultural Storage and Supplies Corporation (PASSCO) for its procurement drive, which for some, is benefiting intermediaries and hoarders alone. "When there is already huge quantity of old stocks available with the government, why is it creating artificial shortage in the market by purchasing more paddies," questions Mohammad Azhar. That also is not benefiting growers but intermediaries who have already purchased stocks from growers, he says. 'It is destabilizing the market.' He did not comment if this would affect exports in effect. But, he reiterated that Pakistan's rice was losing popularity in international market due to emergence of easy-to-cook rice.

Traditionally, Pakistan cultivates varieties of rice such as Super Basmati, Basmati PK-385, Irri-6, Irri-9, and KS-282 etc. It accounts for 6.7% in value added in agriculture and 1.6% in GDP. Rice is the second largest foreign exchange spinner after cotton, earning country over one billion dollar per annum.

Annual production of rice in Pakistan is around 5.9 million tons per annum while domestic consumption stands at over three million tons. Even after meeting local demands, there remains sufficient volume for exports to obtain foreign exchange. Nevertheless, lack of pre-planning on the part of the concerned government departments, weak marketing, and lack of value addition restricts exports to a benchmark of one billion or two. According to some critics of government policy, there is an immense latent potential to increase rice exports substantially.

There is an expectation that world rice price may shoot this year, as they did in 2008, because of the escalating imports demands in many countries. The bad weather has squeezed the outputs of grains in many countries, which are all set to import rice from surplus production countries. According to experts, this may give rise to rice price this year.

For example, India, a second largest producer of rice in the world, is mulling over a plan to import two million tons rice to meet the shortfall of grain in the local market. There was an estimated shortfall of 16 million tons in India and to offset it, India would either go for import option or release stocks from the storage depots in to the market. It eyes for imports of rice from Vietnam and Thailand.