NationalVOLUME 16 ISSUE # 05

EMERGING CHALLENGES FOR RICE EXPORTS

According to the latest figures released by the Pakistan Bureau of Statistics, rice export shipments declined to 266,206 tonnes in July 2020, from 365,138 tonnes as compared to July 2019. As a consequence, export earnings fell to $148.8 million from $194.5m. It should be a matter of concern to both industry stakeholders and the government. In 2019-20, Pakistan’s rice exports fetched $2.27 billion with an annual growth rate of five per cent. The increase was significant as it had come at a time when Pakistan’s total food export bill of about $4.36b was down more than 5pc from $4.61b in 2018-19.

The fall in rice exports in July this year was caused by damage to the paddy crop during the second locust attack. However, the situation has improved as the government took timely action to fight the menace to save the paddy crop. But exporters’ view is that the damage to the paddy crop, particularly in Sindh, has been underestimated by authorities. They say rice millers started factoring it back in July and raised the prices of rice varieties for commercial exporters who, in turn, failed to export as much as they did in July last year. Available figures show that the country can spare 4.4m tonnes for exports as domestic consumption and contingency reserves don’t require more than 3m tonnes.

But the question is: Can we find buyers for 4.4m tonnes of rice? Reportedly, even the mills that directly export rice failed to get large buying orders as they did in July last year. At the same time, their own cost of rice processing increased owing to the general inflationary trend and due to higher forward paddy prices paid to growers. In the end, rice export earnings will depend on whether exporters can manage to export 1m-1.2m tonnes of Basmati rice and 3m tonnes or more of non-Basmati varieties.

It may be recalled here that in 2018-19 and 2019-20, total rice shipments remained above 4m tonnes. But the exports of Basmati rice stood at 791,000 tonnes and 890,000 tonnes in 2018-19 and 2019-20, respectively. According to the Rice Exporters Association of Pakistan, during this fiscal year Basmati rice exports would touch the 1m-tonne mark.

Based on July 2020 statistics of the PBS, the average export price of Pakistani Basmati rice now hovers around $955 per tonne whereas that of non-Basmati rice is around $453 per tonne. With some effort, the average export price for Basmati and non-Basmati varieties could be raised to $1,100-1,200 per tonne and $500-600 per tonne, respectively. If this happens — and exporters, particularly those of Basmati rice, say they are working seriously to make it happen — then rice export earnings could be enhanced substantially with a little increase in the volume of 2019-20 that was below 4.2m tonnes.

According to statistics, the average export price of Basmati rice had shot up to $1,153 per tonne in 2013-14. But the level could not be sustained in later years owing to fierce competition in global markets and, in recent years, also due to a huge depreciation that reduced massive gains in exports in the local currency. The US Department of Agriculture (USDA) recently projected that Pakistan’s milled rice output during this crop year could be 7.4m tonnes against the target of about 8m tonnes set by our Federal Committee on Agriculture. According to experts, the competition in global markets this year is expected to remain tough — with Vietnam having a larger exportable surplus and with stricter rules in place for the clearance of import consignments at ports of buying countries amidst Covid-19 safety measures. The USDA has projected a straight 17pc increase in Vietnam’s total rice output this year.

It is relevant to mention here that maintaining the growth momentum in rice exports during this fiscal year also depends on whether brisk shipments to the United Arab Emirates and Saudi Arabia remain intact. They are among Pakistan’s important markets and our rice export earnings from the two countries were 18pc of the total, according to the SBP. In 2019-20, our rice exports to China — the second largest market after the United Arab Emirates — did suffer because of Covid-19 lockdowns earlier in China and later in our own major cities. So the China factor would also determine to a great extent how our rice exports could fare in 2020-21.

It is well known that unlike the United Arab Emirates, Saudi Arabia, the United States and the United Kingdom where Pakistan’s rice demand does not fall easily on price consideration, it does in China. This means that to boost rice exports to China, exporters will have to be more competitive than in other countries. This is a challenging task as the damage to paddy crops due to the locust attack and the increase in the transportation cost after a hike in fuel prices have increased the cost of procurement of non-Basmati varieties.

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