Pakistan’s rice marketing year is off to an ugly start. According to Punjab Agriculture Marketing Information Services, the price of new super basmati crops in wholesale grain markets such as Faisalabad has nearly doubled over the last year. This reflects the price trend across other markets during November 2022, when basmati prices rose between the range of 40 – 90 percent over the same period last year. Have the floods truly wrecked Pakistan’s rice crop?
Not so fast. The crazy rise in rice prices cannot simply be written off as damage from floods alone. Nearly 85 percent of Pakistan’s basmati production takes place in the northern and central districts of Punjab province, which remained unaffected by the monsoon floods during the summer of 2022. Yet, it is the basmati prices that have gone off the charts during recent months, even more than the non-basmati hybrid and IRRI varieties grown in Sindh.
The monthly wholesale price index (WPI) published by PBS also endorses this view. Rice WPI, which represents the average price change across all rice varieties (both basmati and non-basmati) in select wholesale markets, rose by a little under 29 percent during November 2022 (against the same period last year). In fact, the jump in rice WPI looks quite underwhelming when compared to other grains such as wheat, corn, and pulses (avg), which rose by 43 percent, 35 percent, and 56 percent, respectively.
So, what exactly is at play in the rice market? Since April 2022, basmati prices in the international market are on an exceptional ride. Six-month average prices (Jun-Nov) are up 55 percent in dollar terms alone, rising from $760 per metric ton during 2021 to a little under $1,200 in 2022. The additional Rs 50 depreciation in Pak Rupee during this period has further lifted the prices in local grain markets, turning 2022 into a particularly special year for basmati farmers from Punjab.
The turmoil in the international basmati market is partly an outcome of news from India, which has lowered its rice production forecast by 9 percent compared to preceding the marketing year 2021-22. Although the Indian government did not place a ban on basmati rice exports, the lower production forecast has put prices in the export market on steroids. Recall that the basmati cultivation area in Pakistan’s Punjab province is reportedly lower by 10 – 12 percent during the outgoing Kharif 2022-23 as well, indicating prospects of lower crop arrivals.
But so far, the procurement seems to be off to a mixed start. Although data is still patchy, SBP’s loan to private sector dataset shows that working capital loans offtake by rice processors at the beginning of procurement season is closely following in the footsteps of last year. More clarity is expected once SBP releases data for November end; however, so far as basmati exports are concerned, revenue from rice exports may not be off for a shock after all.
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