According to PBS, quantum of basmati exports increased by 40 percent during 2MFY22, highest volumetric increase witnessed among key export commodities from Pakistan during the period. As market welcomes hopeful news regarding crop performance from the farms in the ongoing season, is Pakistan’s basmati export set to break fresh records?
Hardly. At current pace, basmati export quantum will clock in below 0.8 million tons for the full year FY22, not even among the top-10 years for basmati export report card. The quantum increase during 2MFY22 only looks rosy due to low base effect from the pandemic year, and pales into comparison against export performance just a year earlier. That said, basmati’s performance during 2MFY22 is still second-best in past 10 years, as memories of fixed exchange rate (2014-17) fades away.
So, what’s good and what not so much? Exporters point fingers at 'freight charges gone wild’. Although the disruption of by-sea supply chain – and resulting increase in freight cost - is very much a global phenomenon – exporters complain that containers are simply unavailable for shipment causing delays and even cancellation of orders. Although that appears to be a convenient explanation for the slowdown (compared to 2MFY20) it fails to explain why import shipments haven’t shown signs of abatement. Afterall, containers that land on Karachi’s shores can’t prefer to be shipped back empty.
Whatever the truth behind state of containerized shipments, it is definitely not the only explanation for slowdown in rice export earnings. Basmati export earnings have also taken a severe beating at the hands of pricing, as average unit price of exports witnesses its fourth year of decline (compared to Jul-Aug in previous years).
In fact, basmati prices in the international market are trading below $750 per ton, lowest in at least 5-years. To make matters worse, both basmati producers – India and Pakistan – have witnessed quantum jump in domestic production during this 5 year period. Consider that subcontinent’s basmati output has grown by 20 percent in the past four years to 12 million tons, of which share of eastern neighbour is at least above two-third. The export market is sized at 5 million tons, in which Pakistan’s share is just under one-fourth.
Unfortunately, Pakistan’s return to the export market – post currency depreciation of FY19 - has coincided with a substantial rise in local output in the two basmati origin nations. However, even that’s an incomplete explanation. According to World Bank, rice varieties – of all types and geographic origins – stand apart as conspicuous exception to the ongoing global commodity price spiral. Based on USDA forecast, global rice output is set to remain stable above 500 million tons in 2021-22. According to FAO, rice crops have been protected from the productivity damage seen across several major crops during 2021, and may just prove to be the reason why the ongoing international commodity price spiral shall not turn into a global food crisis, especially in Global South.
That said, the situation offers little hope for Pakistan’s basmati exporters, who may see export volumes plateau at FY20 levels. But a lot may come to depend on the pricing offered by Indian exporters over coming winter season, which in effect sets the tone for pricing for rest of the year.
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