Indian basmati rice exports face an uncertain export outlook after registering an impressive growth of 23 % and 14 % respectively during FY2018 and first four months of FY2019, according to ICRA.
As per an ICRA note released, certain adverse developments, materialised and impending, in some major export destinations could materially hurt the export demand for Indian Basmati rice, thereby exerting downward pressure on realisations across the chain.
Elaborating on the same, Mr. Deepak Jotwani, Assistant Vice President, ICRA says, “The tightening of pesticide residue parameters by the European Union (EU) has resulted in considerable decline in exports to this region (58% in volume and 40% in value over Jan – July period). Nevertheless, while this was compensated by strong buying by Iran; domestic Basmati rice exporters have recently faced payment issues from some Iranian importers.
Also, the imposition of trade sanctions by the US on Iran, which will take full effect in November 2018, may hamper trade between India and Iran. Though in the current fiscal, concerns of major loss of Basmati rice exports to Iran are mitigated as the volumes in 4M FY2019 are equivalent to 72% of FY2018 imports, subsequently, the level of exports to Iran are uncertain and contingent on how the developments pan out. Another evolving concern is of Saudi Arabia following EU by tightening the pesticide residue parameters. However, there has not been any final official notification regarding the guidelines yet.”
ICRA note mentions that besides Iran, changing trade policies by another major importer Saudi Arabia could also have a significant impact. Together Saudi Arabia and Iran, which account for 60-70% of total basmati rice exports from India, can have a considerable impact on the industry.
In the near term, any reduction in demand for Basmati rice from India will depress prices across the chain, even for the sellers not exposed to the export markets in question.