Rice prices: Holding ground

The FAOs rice price update for March shows that after a declining trend in export prices of Pakistani rice over the past few months, a mild recovery was seen in export prices of the Pakistani variety in March this year. In fact, global rice prices also showed a marginal improvement in March after declining for the last few months, owing primarily to a slight increase in rice prices from Thailand and Pakistan, although prices of other exporting countries continued the declining trend. For Pakistan, export prices have risen in March for only the Irri-Pak variety, while those of Basmati rice have remained at the same levels. FAO attributes this improvement in prices of Pakistani rice to increased demand from China, which has beefed up rice imports to contain its domestic prices. However, with the exception of March, rice export prices have been declining globally for most of FY11. This is plausibly due to an improved global rice production outlook. According to the latest estimates of the USDA, global rice production for 2011-12 will be higher by three percent to 465 million tons relative to the previous year. In the case of Pakistan, rice production this year is expected to be over 30 percent higher than what it was last year, with an estimated 6.5 million tons to be produced this year. At the same time, rice exports from Pakistan are also expected to be higher at 3.75 million tons this year in contrast to the three million tons exported last year. Worth mentioning are exports of the Basmati variety, which have not only decreased in volumetric terms this year, but export prices of the variety have also sunk relative to what they were in the previous period (see graph). Initially in FY12, export prices of Pakistani rice had been higher relative to the previous year, owing to floods in Thailand in the former few months of FY12 that helped keep up international prices. However, going forward, not much of an up thrust is expected in export prices going forward, as a continuation of exports to China appears unlikely and global production and ending stocks appear to be sitting at comfortable levels.