This is a report card of how lifting the embargo on export of Indian non-basmati rice from private inventories in September 2011 has rattled competing Asian origins. Policymakers dithered for over three years, and later, judicial intervention in the allocation procedure, perhaps, led to the presumption that ban on exports may not be lifted. Thailand and Vietnam that dominate 50% of international rice trade (32 million tonnes) complemented each other in hiking export prices to unsustainable levels.
Had India been absent from the market, rice from these two countries along with Pakistan would have by now quoted prices of $800-1,000 per tonne (free-on-board) - a situation reminiscent of 2008 when African countries were forced to switch from expensive rice to maize and other cheaper substitutes.
Price discovery of Indian exports was made at $450-470 fob for the 5% broken category. This proved to be a game changer and shocker for traditional players and succour for rice importers. Thais may have to revisit their interventionist policy for paddy procurement of Baht 15,000 ($480) per tonne, equivalent to $740 of milled rice ex-mill, or about $800 fob.
Cartelised hegemony of Thailand and Vietnam is set to diminish or disappear if India stays in the market. Vietnam dropped prices by $70 per tonne in the first week of December 2011, and is expected to narrow the gap with Indian prices by February 2012 when their new harvest hits the market. Indian export of white rice will then feel the pinch of commercial rivalry.
Thailand and Vietnam historically cater to the far eastern and African demand, with special focus on bulk importers such as Indonesia, the Philippines, Malaysia, Nigeria and South Africa. Pakistan filled the void left by India in African and west Asian regions during 2007-11, exporting 3-4 million tonnes annually.
Christmas demand and negative premium of more than $100 per tonne of Indian parboiled rice compelled Nigeria and South Africa to aggressively cover their needs in October 2011 by isolating Thai shippers. This was followed up by 2,50,000 tonnes of contracts of white raw rice by BULOG of the government of Indonesia. Indonesian purchase should provide confidence to other state buyers such as the Philippines, Malaysia, Iran and Bangladesh to follow suit and make the rivals worry about their pricing strategy.
Thai and Vietnamese quotes ($550-650 fob) in October/November 2011 were paper prices rather than traded values. Thai exporters shifted part-exports from India when their buyers threatened to default due to cheap bargains from south Asia. Vietnam has no viable parboiled capacity, while Pakistan is relatively small and inefficient producer of parboiled rice. In coming months, India will be a leading exporter of parboiled rice while Vietnam and Pakistan will service raw rice to major destinations.
India shipped around 1 million tonnes of non-basmati rice by mid-December 2011. Rate of shipment is around 0.30 million tonnes per month, averaging 10,000 tonnes a day from all major ports. The Food and Agriculture Organization estimates that India would be shipping around 1.5 million tonnes of basmati and 2.5 million tonnes of non-basmati rice in 2012 - a projection that appears feasible.
Source : economictimes.indiatimes.com