Bear grip on scrips of rice exporting firms likely to continue .

Chennai, May 6 The stocks of companies that are engaged in rice exports have not really fared well since the beginning of this year. The shares of companies such as Lakshmi Overseas, and Rei Agro have declined.

The downtrend is likely to continue for some more time at least. An upside for these stocks will now hinge on the behaviour of the monsoon and the Government's foodgrains export policy.

Currently, the rice exporters are facing a double whammy. This is particularly true of companies that export basmati rice. One, production of basmati in the crop-year ending June has been higher, though the overall rice production has declined 15 million tonnes (mt). While rice production is seen lower at 84 mt against a record of over 99 mt last year, basmati production has increased 50 per cent to 4.5 mt compared with last year.

Two, the prices of basmati are declining though some exporters have burnt their fingers buying it from the growers at a higher price.

According to industry players, there is a huge oversupply of basmati, primarily Pusa 1121, in the market. Prices of Pusa 1121, a benchmark for other fragrant rice, have dropped to Rs 21 a kg of late, down from around Rs 24.50 a month ago. The prices could fall further as basmati stocks could increase to about 1.5 mt before the start of the next marketing year in October.

The carry-over stocks in this marketing year were at 0.30 mt. Pusa 1121 makes up over 50 per cent of basmati exports from the country. The variety is ruling around $1,000 a tonne in the global market, higher than the $900 base export price fixed by the Centre as part of its efforts to curb exports and tame surging rice prices at home.

But the prices are higher than that of India's main competitor, Pakistan. Basmati rice from the neighbouring country is available at about $850 a tonne.

A fall in the prices of basmati varieties is unlikely to lead to higher exports since the market for fragrant rice varieties is limited. West Asia is the main consumer, while Europe and the US are emerging as dependable markets.

The Centre is unlikely to consider relaxing the curbs on exports, particularly when procurement of rice has begun to slag. Though exports of basmati will not make any difference to the availability of foodgrains in the country, the Centre's suspicion is that nonbasmati rice could be shipped out in the garb of fragrant rice.

The prospects for the kharif crop depend on the monsoon, which, according to the India Meteorological Department, will be normal this year.

But like last year, the problem is the storage position in the reservoirs. According to the Central Water Commission, almost all the reservoirs in the North have reported a storage position of less than 40 per cent of capacity.

The situation is not too bright in other rice-growing States such as Bihar, Uttar Pradesh, Chhattisgarh and Uttarakhand. Overall, things don't look bright at least until October for these firms.

Source : Business Line