Rice following bearish trend

The bearish trend seen in the global food commodity prices over the last 6 months is being followed by rice. The higher prices that rice had during much of 2011 mainly due to massive flooding in Thailand; worlds largest rice exporter, started declining in November 2011. From 254 in November the rice price index of Food and Agriculture Organization (FAO) of United Nations, started a downwards journey and in February the index fell to an year low of 233. The upward revision of the global rice production estimate done by the FAO is considered as one of the main reason behind the decline in the rice prices. In addition, excess production in India, one of the key player in the global rice scene, also kept a downwards pressure on the price of rice. The latest data by the Rice Exporters Association Pakistan (REAP) for 8MFY12 show an 8 percent increase in the total exports compared to the same period in FY11. Variety wise the total exports for the Basmati rice fell by 10 percent in 8MFY12, over the same period last year. Whereas, over the same period exports of the Non-Basmati variety rose by 16 percent. While talking to BR Research, a representative of REAP said that lower exports of the Basmati variety in 8MFY12, are due to the lower yield per acre of the Basmati rice, compared to the previous year. He added "to compensate the lesser produce, farmers asked higher prices, which resulted in a price differential of roughly $200 per M.T, between India and Pakistan". However, Pakistani exporters were successfully able to get large contracts from the African market, which lead to an overall larger export. Despite improved exports, an industry member while talking to BR Research said that "Pakistani rice exports would have been higher by 170,000 tons if India would not have opened the exports of non-Basmati rice". The outlook for total rice exports in the rest of the FY12 is not that bright, as Pakistan is expected to face stiffer competition from India, which has huge bumper crop.

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Pakistan Rice exports
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                       8MFY11                    8MFY12
              Qty (tons)   ($ mn)   Qty (tons)   ($ mn)
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Basmati         718,187      592      647,761       563
Non-Basmati    1,663,161     724     1,922,187      866
Total          2,381,348   1,316     2,569,948    1,429
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Source: REAP