Rice earnings to be in check

Given the fact that Pakistan is one of the worlds biggest exporters of rice, annual rice production and FOB prices are the most-watched indicators for rice farmers and exporters in Pakistan. Rice prices, after touching a low in May last year, joined the food price rally which began this summer. Therefore, the FAO All Rice Price Index, which is based on rice export quotations from 16 countries, rose by 23 percent during the first six months of current fiscal year. Similarly, the FOB price of Pakistani Basmati rice has risen by around 51 percent in the past six months to $1,150 per ton in December. At the same time, the FOB price of Pakistans 25 percent broken rice also surged to $431 per ton from $340 per ton in June, according to the FAO. Rice prices gained support from water catastrophes in various rice producing countries, such as Pakistan, Thailand and Vietnam, and the so-called substitution effect, stemming from the surge in wheat and maize prices. On the back of improved prices in the international market, the country was able to fetch around $1 billion in revenue in 1HFY11, a growth of nearly 8 percent over the same period last year. Higher export revenue came in the face of lower export quantity, which fell to 1.67 million tons in 1HFY11 from 1.75 million tons shipped in the same period last year. Although higher rice prices supported export revenue growth, when compared to the price indices of other agriculture commodities; the upward movement in rice prices has not been enough to cheer farmers and exporters. FAO Cereals Price Index, which is compiled using both the grains and rice price indices; has strengthened by 57 percent since June. At the same time, the FAO Sugar Price Index gained 77 percent- implying that farmers will be more inclined to sow wheat, maize, sugar and the likes, compared to rice. Although farm-commodity prices are expected to extend the rally next year, the gains in rice would likely be relatively modest. This is mainly due to the availability of generous rice output in the worlds largest rice producing countries, such as India, China, Vietnam, Indonesia and Thailand, along with a reasonable global stock level. Global rice production is projected at a record 452.4 million tons in 2010/11, around 3 percent higher than a year earlier. Humble growth in the rice price rally is not overwhelming news for Pakistani rice traders and farmers, as the country is expected to ship a lesser quantity of rice compared to the last fiscal year. USDA gives a less optimistic forecast of rice export from Pakistan as they expect rice production to dwindle by 26 percent to 5 million tons in 2010-11 compared to 6.8 million tons last year, expecting the country to ship just 2.6 million tons in 2010-11 compared to 3.8 million tons in 2009-10. However, rice exporters are painting an optimistic picture expecting to ship around 4 million tons in FY11, slightly lower compared to 4.6 million tons exported in FY10, on the back of less than feared crop damages and ample carry forward stock from last year.