As news broke of a 31 percent increase in dollar earnings from rice exports, many broke out the proverbial champagne. Afterall, the early months of the fiscal year have historically been slow for exports, as new crop arrivals only begin in earnest by November every year. The Jul – Oct 2023 performance, therefore, rightfully caught commentators by surprise, especially considering that export growth had remained flat during the first three months. Does the October 2023 surprise herald the coming of a record performance year for rice industry?
Short answer? No. As optimists are too quick to forget, October 2022 was an unusually slow month for exports. The unprecedented floods of the preceding month had brought order fulfillment to a halt, as rice exporters paused operations to take stock of the reportedly large-scale devastation of crop across the country and re-assess pricing on existing export orders for carryover stocks from previous seasons. Therefore, the 78 percent increase in quantity exported for the month of October is in large part an abnormally low base period at work.
Nevertheless, exports of nearly half a million metric tons of rice during the month are a record for October, argue optimists. But that record-breaking performance begins to pale in comparison to even the flood year, when stretched over the four-month period. For Jul – Oct, quantity exported has only increased by 7.5 percent on aggregate basis. Exporters may have pulled a rabbit out of their hats during October, but no miracle has transpired during the fiscal year to date. In fact, quantity exported for 4M-FY24 is only third highest over the last 10 years, and only 11 percent higher than the decade-average.
But that shouldn’t mean that export performance wouldn’t be spectacular over the remainder eight months. Naturally, record prices should mean margin accretion for the exporters, but volumes do not look too promising. Consider that the basmati export volume during 4MFY24 is one-third lower than the peak volume witnessed during the Covid year. At this rate, basmati exports will barely make it past 0.8 million metric tons for the whole year, which is a farthest cry from the million tons plus exports witnessed during late 2000s (for the variety).
Which is really a tragedy when you consider that out of the 9 million metric tons rice production forecast for the current season, up to 4.3 million metric tons is expected to be of basmati variety, the highest-ever reported production so far. Remember, the gains in basmati production have largely been driven by the export allure, as the significant rise in prices has driven the variety out of the reach of millions of domestic consumers, dampening demand substantially in the local market. If the surplus isn’t going to make its way to the export market, has the economy truly benefited, other than in the form of significantly higher prices?
More importantly, short of a climate event in largest producing regions such as India or China, 2023-2024 is expected to be the last year of global rice market remaining in stress. The top 5 producing regions are ramping up efforts to significantly increase cultivation to ensure domestic food security concerns, and the balance is expected to return to the international market by next marketing year 2024-25.
If Pakistanis exporters aren’t going to make the most of the price opportunity in the export market right now, what is it really gonna take for Pakistan’s rice exports to become more than a footnote in global rice trade?
Comments