When the rice sowing period started in May this year, greater availability of fertilizers and hybrid seeds along with favorable export prices had sent waves of optimism amongst farmers and rice traders. The industry was expecting a bumper rice output of around 6.5 million tons in FY11.
But hardly anyone had incorporated the risks of a natural calamity of such a large scale into crop projection analyses. The massive flood has washed away nearly one-third of the countrys rice output. It has been projected that rice production will fall to 4.4 million ton this year, according to USDA.
Though, the drop in crop output is not expected to disrupt local supply, with local consumption standing at around 2 million tons, the export sector will likely take a major hit. Rice exports from Pakistan are expected to fall to 3~3.5 million tons, compared to more than 4 million tons exported during the last fiscal year.
Setting aside losses borne by farmers and exporters, it will also inflict serious damage to the balance of payments. "The expected decline in rice exports is likely to have an impact on government revenues and adversely affect its already fragile economy", a USDA report pointed out.
Record rice export volumes during the last fiscal year and sky-high rice prices in FY09 helped Pakistan fetch foreign revenues to the tune of $2.17 billion and $1.98 billion respectively, according the FBS.
Last year global rice prices were way below the sky-high levels of 2008; the FAO All Rice Price Index, based on quotations from 16 countries, plunged to 253 points in 2009 from 295 points in 2008, averaging around 220 points during first the half of 2010. However, nearly 47 percent higher export volumes helped Pakistans rice sector in riding out the price decline fairly well.
This time, neither ample export volumes nor a hike in rice price is expected. Rice prices during this year are expected to remain relatively stable on the back of generous global supplies. According to the FAOs latest report, world rice output this year is expected to be 3 percent higher from 2009 and at a historical record.
As Pakistani basmati rice has been a favorite among international rice buyers, rice traders are expecting to fetch a favourable price on basmati export this year. However, in any case, the hike in price would not be enough to compensate for the expected decline in export volumes.