This summer has proved to be bane for rice lovers, as heavy floods and storms in certain parts of Asia have damaged the monsoon crop output.
Flux in the global rice bazaar started three month ago after the floods hit rice fields in Pakistan, following which water catastrophes in Thailand and Vietnam, the worlds leading rice exporters, last month fuelled further worries. Not to mention, the rice market has also gained support from the so-called substitution effect, as driven by surge in wheat and maize prices, consumers have shifted to rice.
The disarray in global rice market can be gauged from the FAO All Rice Price Index, which is based on rice export quotations from 16 countries. The FAO rice index has risen by around 16 percent since June to 244 points in October, while at the same time, the FOB price of Pakistan Basmati surged by around 28 percent to $975 per ton.
On the back of weak dollar, along with embargo on export of non-basmati rice from India - which is likely to remain intact this year - it seems improbable that international rice quotations will show any drop from current level till the next harvest in March/April.
But, when compared with price indices of other agriculture commodities, so far, upward movement in rice price has not been influential enough to cheer farmers and exporters. FAO Cereals Price Index, which is compiled using both the grains and rice price indices, has strengthened by 45 percent since June - implying that farmers will be more inclined to sow wheat, maize and the like, than rice.
Moreover, despite the rise in global rice prices, average FAO All Rice Price Index in the first four month of this fiscal year was close to 227 points, slightly lower compared to an average of around 232 points in the twelve months ending June 2010.
This is mainly due to the availability of generous rice supply along with reasonable stock level. According to the recently released FAO Food Outlook, rice availability is going to be 11 million tons higher in 2010-2011 compared to the production last year - albeit it is seen some 5 million tons less than the previous forecast of 472 million tons.
This is definitely not overwhelming news for Pakistani rice traders and farmers, as the country is expected to ship less quantity of rice compared to last fiscal year.
Estimates of rice crop losses vary; the government puts the number somewhere between 1-2 million tons, while rice exporters estimate it around 0.5 million tons. This means the decline in Pakistans rice exports could be around 0.5 million to 2 million tons, depending upon whose estimate you believe in.
Since it has been nearly four months into the current fiscal year, it is too early to say for certain but given current scenario, chances look slim that rise in rice prices would be enough to make up for lower quantum of rice exports from Pakistan in FY11.