Low price weighing on rice

The latest export numbers paint the same old bleak picture for the countrys rice industry, as both Basmati and non-Basmati varieties have shown a decline in dollars earned - for the eleven months ended FY16.

Pakistan's Basmati rice exports are down 7 percent year-on-year in terms of volume and a whopping 27 percent in value. Meanwhile, the long-grained rice exports have increased 12 percent by volume yet also registered a small decline of 3 percent in dollar earnings.

Basmati is a more expensive and premium variety of rice, and thus fetches better value. However, it has been suffering for a number of years now, and little has been done to rejuvenate it. There are two main reasons for the decline: (a) inability to compete with India's lower prices, and (b) lack of research and development in better varieties (Read: "Rice exports down on Basmati slump," Published November 30, 2015).

The long-grained, non-Basmati variety continues to do well, as Pakistan continues to sell to low-income countries where cheap rice has a high demand. However, this earns far less than the Basmati variety. Moreover, the lower commodity prices cannot be ignored, as a result of which even higher quantities are earning lesser dollars still.

Nevertheless, some positive developments have been witnessed as of late; Iran is open for business and developments on the ground are under way, albeit progressing slowly. The opening up of one of the world's foremost consumers of Basmati rice (and previously Pakistan's largest market for it) is quite welcome. The nuts and bolts and opening of channels are currently in the process, a source at REAP told BR Research.

Moreover, REAP has been doing a good job in terms of improving its bilateral agreements, last month returning from a successful visit to China. Currently, REAP is in talks with Mauritius for a bilateral trade agreement, an official told BR Research.

However, to enter China is to up one's game and compete with the best; China has the best quality rice. A REAP veteran told BR Research that there are strict quality checks in place in China. Moreover, what is needed by the industry is upgraded with modern machinery. The budget has totally ignored the rice industry, placing more duty on machinery imports. "Chinese demand cannot be captured using local machinery. One needs modern and imported machinery," REAP member Wajid Paracha told BR Research.

In terms of Basmati, he regretted that nothing has been done whatsoever to improve the situation.
The association asked for a break on WHT but the request has been totally ignored. He said that people are leaving the rice trade. Indeed, the promises of the Trade Policy 2015-18 also have yet to see the light of day.