Rice exports stymied by falling prices

Rice to Pakistan is so much more than just food. Contributing more than nine percent of the countrys exports; rice is the second largest contributor to Pakistans export receipts. In this context, changes in global demand for rice and its international prices always entail far-reaching impact on the countrys economy. Rice export data from the outgoing quarter (July-Sept 2011) warrant a closer look, as the quantity of rice exported during this period fell by a whopping 31 percent when compared to the same period of last year. However, despite the massive plunge in quantity exported, in terms of value, the decrease was relatively limited to 11.2 percent. Rising prices of rice in international markets have helped shore up export receipts, albeit the fact the sales abroad have not been much to write home about in recent months. The higher producer price set up by Thailand pushed up global rice prices. As a consequence, Pakistani exporters despite low quantity of exports enjoyed good prices. Still those riding the price bonanza may soon be shaken from the saddle, for international rice prices may soon head south. FAO has raised its forecast for the world rice production in 2011 by about 2 million tons since September. One of the main contributors to the downward price pressure on rice is due to Indias return as a supplier in the global market. Favourable weather patterns during the outgoing monsoons are expected to take that countrys rice harvest tally to 103 million tons. That would mean 8 million tons more of rice produced, when compared to Indias rice production in 2010. Chinas rice production is also expected to rise by 3 percent due to governments support to the sector. The decrease in supply due to flooding in South Asian region was offset by the higher output of these countries. A decline in demand due to the increasing uncertainty over the global economic environment is also acting as a dampener on international rice prices. This phenomenon is reflected by FAOs index for food commodities, which fell by 4 percent in October 2011 when compared to the preceding month. Given that both demand and supply-side factors appear poised to slash rice prices, persistently low production could mean a sizeable reduction in the sectors export earnings and the countrys cumulative export receipts.