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It had become expected, but it certainly didn’t start that way. Pakistan’s annual rice exports earnings breached $2.5 billion during FY22 for the first time in history, growing 23 percent over the previous year. Rice exporters added nearly half a billion more in export earnings, the largest increase in exports outside of traditional categories such as garments and apparel.

What is impressive however is that the rise in exports earnings has come on the back of a tremendous increase in volume exported. Quantity exported remained barely shy of the 5 MMT mark, closing the full year at 4.87 MMT. This represents a 32 percent increase over the previous year, or 0.6 MMT more over previous record volume achieved in FY16.

Which means that record rice export earnings (and volume) have come on the back of unit prices which were actually lower compared to last year. Average unit prices of export for both major varieties – basmati and non-basmati – remained subdued. Average export price (basmati) stayed virtually unchanged - $926 per MT against $937 the previous year, while non-basmati average unit price fetched fell $36 per MT from $476 per MT during FY21.

Aggressive marketing efforts of rice exporters and commerce ministry both deserve praise for this feat, along with farmers who have produced a sizable exportable surplus year after year. However, much needed support seems to have come from weakening of macroeconomic fundamentals that were beyond the control of rice export value chain. The financial year had started on a poor note for rice exporters, with Q1 exports lagging behind target. Only 0.7 MMT of rice was exported between Jul – Sep 2021, just 15 percent of total export volume during full year.

But help came in the form of rapid currency depreciation, which made export lucrative despite weak prices in the international market. As the currency fell by Rs 30 against dollar in the following 9 months of the fiscal year, paddy procured during the harvest period at lower prices, could now be sold at significant mark up, making Pakistani quotes attractive in the highly competitive rice export market.

The windfall gains are a breath of fresh air but not a surprise. FY20 also saw record export earnings, that followed the rapid decline in local currency value over the preceding year. Of course, the relationship between commodity exports competitiveness and currency depreciation is well established. But the real test comes now.

With Pakistan’s rice cultivation area already at its peak, the limits of exportable surplus are being tested. The country may have exported as much as 90 percent of its production of coarse rice during the outgoing fiscal year, with farm economics coming under pressure due to rapid escalation in cost of production, especially fertilizer and pesticides. This has now begun to reflect itself in higher prices quoted by Pakistani exporters in recent months. Local wholesale prices of premium basmati varieties rose by as much as 70 percent in some areas between July’21 and ’22. Will rice exporters manage to breach $3 billion barrier in 2022-23?

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