Rice braces for a southward flight

Having temporarily risen in March this year, rice prices of the Pakistani variety appear to have started easing again in April. A demand glut from China was responsible for the one-off increase in March, with the Asian giant upping its rice imports to contain rice prices at home. In fact, according to the USDAs latest revised forecast for imports from China depicted a phenomenal increase of over 85 percent to 750,000 tons. Yet, despite the improved demand outlook from China, global rice prices are expected to stabilise in 2012, thanks to better production estimates, particularly from Asian countries including Pakistan. Earlier this month, the FAO issued a statement, quoted in the Bloomberg, saying "Under current prospects of ample availabilities, export prices could remain under downward pressure in the coming months." World production of rice in 2011 is estimated to be about three percent higher at nearly 464 million tons, while the FAO estimates global production to be even more robust at 488 million tons in 2012, thanks to expectations of more neutral weather conditions in the months to come. Much of the improvement in rice production is expected from the Asian countries, including India, Pakistan, Thailand, Bangladesh and Philippines. In the case of Pakistan, rice production during 2011-12 has been estimated to be about 30 percent greater at 6.5 million tons than what it was in 2010-11. Rice exports, in terms of volumes, are also expected to be better at 3.75 million tons during 2011-12 relative to 3.2 million tons during the previous year. Prices of rice exported from Pakistan, on the other hand, have been declining since the beginning of this fiscal year (March being an exception), with the Basmati variety having seen quite a fall in prices. In fact, Pak Basmati export prices in April were at a 19-month low, according to rice price data released by the FAO, at $825 per ton. So far in FY12, net rice exports from Pakistan have been marginally lower in the months gone by relative to July-March FY11. With FY12 having started on somewhat firm prices, much of the decrease in net exports for 9MFY12 comes at the heels of lower volumetric exports of the grain, especially in the initial part of FY12, when the Sindh floods and rice harvest up to November plausibly affected production and exports. Subsequently, however, the quantities exported of both varieties have been stable in FY12. Going forward, one can see a price-led decline in rice exports from Pakistan, with expectations of a slump in global rice prices in the months to some. Better rice production estimates, however, lend some respite as rice exporters can make up for any prospective decrease in prices by exporting greater quantities.