Monthly Archives: June 2015

Unable to compete, rice exporters demand incentives

Say competitors are providing hidden concessions to their industries

Rice growers and exporters have voiced concern over their future after losing some major markets to Asian competitors and failure to meet export targets over the last five years.

They have sought assistance and facilitation from the government like the way their rivals in Thailand, India and Vietnam are receiving.

According to the Rice Exporters Association of Pak­istan (REAP), the country has not been able to achieve higher export targets and the highest shipments recorded so far were in 2009-10 when exports were valued at $2.2 billion. Since then, the exports have remained more or less stagnant.

The growers and exporters are apprehensible of the challenges ahead and have invited attention of the authorities.

Prices of basmati rice were Rs4,400 per 40 kg in 2013-14, which came down to Rs3,400 and then to Rs2,600.

The prices fell after India flooded the international market with its basmati rice. India had also captured the rice market of Iran but for the last two years, Tehran has slapped a ban on shipments from India.

For Pakistan, China has been the main market of Irri-6 rice as 362,000 tons were exported in 2011-12, 589,000 tons in 2012-13 and 353,000 tons in 2013-14. However, this year, exports to China stand below 200,000 tons, which is very low compared to the last three to four years. With the situation persisting for the past two years, paddy and rice prices have recorded an unprecedented decline of more than 40%, causing huge losses to the industry.

The exporters believe that governments in Thailand, Vietnam and India are providing hidden incentives to the rice industries and fear they will offer more concession and facilitation. These incentives will put Pakistan’s industry at a disadvantage and throw it out of the international market, leading to piling up of surplus stock in the country.

REAP President Malik Jahangir, in a statement, called on the government to provide relief and bail out the rice industry. He stressed that the government must process all applications of rice exporters pending with the State Bank and provide loans in the next three months.

He said commercial banks should be asked to provide relief in margin calls as prices had dropped about 50% in Punjab for some varieties of rice, especially old basmati.

The industry also asked the government to provide rice farmers with seeds, pesticides, electricity, water, dryers and other equipment free of charge in order to bring down the cost of production and enable exporters to compete in international markets.

Outlining the key reasons that hurt rice exports from Pakistan, the industry pointed to the global surplus of grains, particularly rice, with major producers – Thailand, India and Vietnam – holding huge stocks from the last three years. This has pushed their governments to offer hidden export subsidies to sell the surplus commodity.

In the last 15 years, the global rice trade has grown almost three-fold from 12 million tons to 33 million tons per annum. The major producers are not only doling out huge cash subsidies to the farmers, but are also assisting in research on seed varieties.

Pakistan can export 50,000 tons of rice to the Philippines

Pakistan has secured a quota of 50,000 tons of rice imports in the Philippines for the year 2015, according to the Rice Exporters Association of Pakistan (REAP).

A high-profile trade delegation visited the Philippines earlier in April 2015 and met its government departments with the support of the ambassador of Pakistan.

The National Food Authority (NFA) – Philippines’ authorised state body – has invited the private sector to participate in the import of an aggregate volume of 805,200 tons of rice under the Minimum Access Volume (MAV) for this year.

The Country Specific Quota (CSQ) is broken down as follows: Thailand and Vietnam got the largest share of 293,100 tons each. China got 50,000 tons, India 50,000 tons, Pakistan 50,000 tons, Australia 15,000 tons and El Salvador 4,000 tons.

The total import volume comprises 755,200 tons of country-specific quota (CSQ) and 50,000 tons of omnibus origin volume.

All rice imported under the 2015 MAV rice importation programme will be levied with a tariff of 35% to be paid in advance to the Land Bank of the Philippines, with the Bureau of Customs making the final assessment and valuation.

The importers are allowed to import well-milled rice with quality not lower than 25% broken or other special rice varieties.

The NFA will accept applications under the 2015 MAV, 15 days from publication of the notice.

The interested parties should submit documents to the Grains Marketing Operations Department at the NFA central office and pay a non-refundable processing fee of 50,000 Pesos.

The corporations, partnerships, sole proprietorship, farmers’ cooperatives and joint ventures can apply under the programme. The importers should be able to deliver the imported rice on or before November 30, 2015.

Pakistan, one of the top five rice exporters, has a 15% share in the international market but it is struggling in even sustaining its $2 billion rice exports. Its annual rice production is close to 6.5 million tons out of which approximately 4.5 million tons is exported – equivalent to 70% of total domestic production.

Commerce Ministry to hold meet over low domestic rice price

THE Commerce Ministry will this week call for a meeting with rice exporters, millers, and traders to try and solve the problem of the rice price falling domestically despite the higher export price for rice and stronger demand globally due to drought including in Thailand.

Commerce Minister General Chatchai Sarikulya said the domestic rice price should increase soon because of the widespread drought.

“The price of rice domestically |should reflect the export price, with |the price of white rice increasing |gradually from higher demand amid drought in many countries, mainly in Thailand, China, and Vietnam,” said Chatchai.

He said that the ministry would ask traders to buy rice from farmers at a fair price and one that reflects market demand.

Chatchai added that with lower rice supplies in the world market, Beijing has urged Thailand to accelerate the supply of rice to China under a government-to-government agreement.

“Thailand should be able to export 10 million tonnes of rice this year as more orders will come from drought-hit nations,” he said.

The Thai Rice Exporters Association reported that Thailand shipped 3.77 million tonnes of rice in the first five months of the year, down 1.4 per cent on the same period last year, while the value dropped 2.7 per cent year-on-year to Bt61.36 billion.

However, shipments in May were up by 7.3 per cent in volume to 945,597 tonnes, while the value rose 2.3 per cent to Bt14.11 billion.

As of June 24, the export price for 5 per cent white rice was US$380 (Bt1,284) a tonne, up from $373 a tonne the previous week.

Last week, the price of 5 per cent white Vietnamese rice was $355, and Indian rice was $370 a tonne.

The Thai Rice Millers Association reported that the price of white paddy rice was between Bt7, 500-Bt8,000 a tonne last week.

Fake rice allegation was untrue, baseless

Health Ministry clarified allegations that a rice producing factory in Kedah produces fake rice was untrue and baseless. “Based on our checks in the factory, we found that allegations on the factory is untrue,” said the ministry’s director-general Datuk Dr Noor Hisham Abdullah. With the clarification, he advised the public not to be worried as monitoring and enforcement of food safety activities were constantly being carried out to ensure food sold in the market was safe. “If consumers are worried and uncertain about the safety status of food in the market, consumers can make a complaint to the Ministry of Health through state health departments and offices or make an online complaint at http://fsq.moh.gov.my or health ministry’s official Facebook page,” he added. Dr Noor Hisham said the ministry takes serious of any allegation in regards of food safety and now the alleged fake rice from China which has gone viral on social networking sites. Adding further, he said the issue has already been clarified by PadiBeras Nasional Berhad (Bernas) and the ministry has issued a statement last May 21 that a majority rice import were from Vietnam, Thailand and Pakistan. “Rice import from China is very small, less than 0.01 per cent compared to 800,000 tonnes of rice a year. “Rice from China is usually on request for use in Japanense and Koren food restaurant in Malaysia,” he added.

El Nino ‘unlikely to affect rice supply’

Rice importers here are not losing sleep over El Nino, despite warnings from climatologists.

Forecasts in recent weeks of the strengthening El Nino – a dry weather pattern – warn of droughts and disrupted rice harvests across the Asia-Pacific.

Japan’s weather bureau even predicted that the dry spell could be as bad, or even worse than that in 2009, when some rice exporting countries had to ban exports to satisfy domestic demand.

The price of Thai fragrant rice, which importers say is the most popular type here, cost about US$1,400 (S$1,860) a tonne in 2009.

Rice importers, who now pay about US$1,000 a tonne for Thai fragrant rice, told The Straits Times they are better placed to weather the storm now.

Mr Lim Ek Kwong, operations manager of major rice importer See Hoy Chan, said it now imports rice from about 15 suppliers in four countries – Vietnam, Thailand, Myanmar and Cambodia.

In 2009, it imported rice only from five suppliers in Thailand.

“If one country closes its doors to us, we can now still get rice from elsewhere,” he said, adding that Thailand still has large stockpiles of rice that will help mitigate the price increases. He has seen no change in prices and supplies in recent times.

Managing director of Chye Choon Foods, Mr Jimmy Soh, said: “So far, it is hearsay. We have asked suppliers to let us know if something happens.”

Supermarket chain NTUC FairPrice said prices remained stable and were, in fact, lowered last year. A 5kg bag of FairPrice Fragrant Rice had cost $6.90 since 2011, but was reduced to $6.50 in January last year, said Mrs Mui-Kok Kah Wei, its senior director of purchasing and merchandising.

As a major rice importer in Singapore, NTUC FairPrice stockpiles more than three months of supply at any time, she added.

Sheng Siong supermarket also said that prices of rice are stable, but it is monitoring the situation closely.

When contacted, the Ministry of Trade and Industry (MTI) said Singapore has “a food import diversification policy to safeguard against any food supply disruptions”.

“Apart from our top three import sources, Thailand, India and Vietnam, there is also sufficient supply from other countries including Myanmar, Pakistan and Cambodia,” said an MTI spokesman. “There has been no noticeable impact on the quantity and prices of our rice imports so far.”

The latest figures from IE Singapore show that 361,930 tonnes of rice were imported in 2011, rising steadily to hit 498,633 tonnes last year, or a rise of 38 per cent.

The past few years had seen a change in the main supply source of rice to Singapore. In 2013, India, for the first time, overtook Thailand as the Republic’s biggest rice supplier.

Last year, 37.4 per cent of total rice imports came from India, and 32.3 per cent were from Thailand. In 2009, Thai rice consumed here accounted for 62.1 per cent of total imports.

Vietnam’s rice exports in stalemate

Rice HQ

According to the Vietnam Food Association (VFA), Vietnam had exported 2.1 million tons of rice by the end of May, earning $870 million, a decrease of 10 percent in export volume and 13 percent price decrease in comparison with the same period in 2014.

To date, Vietnam has signed contracts on exporting 3.5 million tons of rice, or 8 percent lower than the same period of last year.

Rice exporters complained that rice exports this year have been unsatisfactory. Thailand and India, the Vietnam’s biggest rivals, all have big inventories. Thailand is reported to have 15-16 million tons in stock, while India has 23 million tons.

VFA noted that Thailand tends to lower the selling price in an effort to clear the stocks. Meanwhile, India and Pakistan are competing fiercely in Africa and the Middle East.

As exports have been in a deadlock, the domestic price has been decreasing.

According to Vo Thanh Do, a senior official of the Ministry of Agriculture and Rural Development, in the Mekong River Delta, fresh IR 50404 rice is traded at VND4,150-4,250 per kilo.

“Though Vietnam has won the bid to provide 150,000 tons of rice to the Philippines, the domestic price is still on the decrease,” Do said.

VFA has proposed to collect summer-spring rice for stockpile to help stabilize the domestic price and ensure reasonable profit for farmers.

“We will be keeping a close watch over the summer-spring rice harvesting, especially in July and August, the peak harvest season, and make a proposal about how much to collect,” Do said.

Vietnam urged to stop following ‘high yield, low price’ strategy

China remains Vietnam’s largest rice consumer, which bought 35 percent of the 2.1 million tons of rice Vietnam exported in the first five months of the year.

However, experts have warned against the heavy reliance on the Chinese market. China, despite high demand, has been tightening imports across the border gate since mid-2014, which has made it risky for Vietnamese enterprises to export rice to the market.

A source said that even contracts on exporting rice through official channels were also canceled, stressing that it was very risky to do business with China.

Nguyen Thi Bich Vuong, director of Hung Thinh Trade and Import/Export Company in Lao Cai province, specializing in exporting rice across the border gates to China, said only several consignments of goods were exported in the first three months of the year.

Meanwhile, no consignment has been exported since April when China began tightening control over imports.

Basmati export falling off

Both exports and imports play an important part in the economic growth of any country. Export is crucial to meet the required foreign exchange gap and to increase import capacity. An increase in import boosts industrialisation and overall economic activity. Rice is the second largest commercial crop. The international rice market has been dominated by two major tendencies from the 1990s, first a sharp rise in volumes and, second, a continued slide of international prices.
Rice export from Pakistan is turning to be a failure, when taken in consideration of its projected potential. The exports were stagnant for last many years. The government needs to take effective measures to increase the yield, production and quality of export rice. Pakistani rice exporters have to improve rice quality and branding, there is a need to work on a strategy to improve the quality of our exports and carefully grade and differentiate goods of various qualities and types.

Rice sales, exports reported

Net rice sales of 32,300 MT for 2014-2015 were down 11 percent from the previous week and 15 percent from the prior four-week average, according to this week’s Export Sales Highlights report. Increases were reported for Mexico (10,400 MT), Costa Rica (9,700 MT, including 8,200 MT switched from unknown destinations), Japan (7,600 MT), Guatemala (6,900 MT, including 5,000 MT switched from unknown destinations) and El Salvador (5,000 MT, including 5,600 switched from unknown destinations and decreases of 600 MT). Decreases were reported for unknown destinations (18,700 MT) and Taiwan (4,900 MT). Net sales reductions of 100 MT for 2015-2016 were reported for Japan.
Exports of 53,600 MT were down 48 percent from the previous week and 31 percent from the prior 4-week average. The primary destinations were Mexico (14,100 MT), Saudi Arabia (13,700 MT), Costa Rica (8,300 MT), Guatemala (6,600 MT) and El Salvador (5,300 MT).

Dominating the rice exports market

If the probability of deficient monsoons does not cast a negative spell on Indian summer crops (or assuming that Skymet’s forecast is proved right) and rice production stays around 103 million tonnes (MT), India can again maintain top rank in world rice trade by shipping out about 12 MT in 2015-16. An adverse export performance by India can rattle worldwide rice trade with extreme volatility and exorbitant prices.

India has been top exporter in global rice trade of about 42 MT by averaging 10.5-11 MT (25% of world trade) annually during the last four years (since 2011). The sustainability in rice exports-the only one with a competitive-edge internationally as compared to other Indian agro commodities-is the resultant outcome of a combination of external factors, dynamics of domestic market, hybridisation of paddy, and efficient execution of contracted business both form east and west coast ports of India. Thailand has been trailing India by a small margin in the last two years, while India is also exposed to competition from Vietnam, Pakistan, Myanmar and Cambodia.

India primarily caters to the MiddleEast and Africa for non-Basmati and the EU and the US for Basmati variety.

Dubai has emerged as a key trading hub for financing and facilitating payments, especially for Africa. Indian exports are undertaken by medium-sized private companies from open market, without any export subsidy or government intervention. No MNCs or PSUs or mega corporates are engaged in this business. After prohibition on exports was revoked in 2011, FCI’s stockholdings remain untouched. There are no MEP (minimum export price) or registration requirements that enable ease of doing business.

China ignores India

China’s current rice imports are about 4 MT in 2014-15, up from 0.5 MT in 2010-11, and it has kept Indian non-Basmati rice at an arm’s length. Chinese supply-demand gap is filled by official and unofficial imports from Thailand, Vietnam, Pakistan and Myanmar, though recently grey market access through land route is attempted to be blocked. China’s escalating import demand due to water conservation measures and higher cost of paddy will continue to increase in the near future and that will keep South-Eastern origins (Vietnam and Thailand) well supported for consumption of their production, which is a net advantage to India for pricing and limiting trade rivalry. At political level, the Indian government’s efforts are on for induction of non-Basmati rice into Chinese procurement system.

Thai effect

The Thai government messed up its entire rice matrix through modified “paddy pledging scheme” of 2011 by giving farmers values 50% above market price for political populism that resulted in accumulation of 18 MT of rice equivalent to 43% of world rice trade, pushing price levels unrealistically way above international quotes including those from India. Though this scheme was wound up in 2014, it depressed Thai’s booming exports from 10 MT in 2010-11 to 7 MT in 2011-12, while causing severe collateral long-term damage to rice quality, despite prices having crashed to tradable levels by $200/MT (from $580 in 2011 to $380 fob now). Some lessons can be learnt by India that abnormal increase in MSP with dedicated procurement can be counterproductive. Out of 18 MT of pledged inventory, 10 MT is to be reprocessed, 6 MT gone irreparably bad/unfit for human consumption and only 2 MT could be sold (USITC report of April 2015). Thus, international buyers suspect Thai quality. It has simultaneously generated goodwill for Indian rice with enhanced access/success abroad.

Iran’s interest

Other external developments were the US and the UN sanctions against Iran in 2010-11, opening of an Indo-Iran rupee account, and commercial exploitation by Iran of high yielding Pusa 1121 Basmati rice developed by IARI, which is 33% cheaper (about $1000-1200 fob) than conventional Basmati rice ($1600-1800 fob). Pusa 1121 has exceptionally long grain length of about 8-mm with elongation characteristic of 25-mm upon cooking. About 1.4 MT was shipped out in 2013-14 versus 0.6 MT in 2011-12 to Iran, which proved highly remunerative both for the trade and farmers. Though Iran notified a general ban on Indian imports in 2014-15 due to excessive imports, it turned out to be “restrictive” trade between “select” importers and exporters with overall exports touching around 0.95 MT.

Other Middle Eastern nations-Saudi Arabia, Kuwait, Yemen, UAE-are also keen to procure more of Pusa 1121 rice.

The West African market (Nigeria, Senegal and Ivory Coast) and South Africa of about 3-3.5 MT per annum is hooked onto 5% parboiled variety and 100% brokens parboiled rice. No other origin, except Thailand, can “efficiently” service parboiled requirement. Thai’s inconsistent quality, higher prices and freight for Africa are favourable for the growth of Indian parboiled rice industry.

India’s MSP of non-Basmati paddy is about $224/MT. All other origins, except Pakistani, are costlier than India. Further, levy procurement by state governments stands abolished in 2014-15 which has enhanced market availability. FCI is trying to auction 25% broken rice (raw/parboiled) at OMSS of R23/kg while in open market 5% brokens parboiled can be bargained at R20-21/kg. There are virtually no takers for FCI stocks. This evidences market comfort in the supply side. There are multiple varieties on offer like IR36, IR64, 1001, Swarna, Sona Masuri, Ponni samba Parmal and P4 and that gives options for transacting the deal at right prices. Indian grain is available throughout the year even from West Bengal, Bihar, Chhattisgarh, Odisha and Jharkhand in addition to other growing regions. Rice is not traded in any future exchange and thus there is nil scope for open speculation or price rigging.

India’s presence in global rice trade is a great stabilising force. Exports support better price realisation for paddy farmers; Basmati is a product of specific GI (geographical identification) and is highly remunerative. India’s absence/decline from non-Basmati rice in international trade will spike prices more than $1000/MT fob (currently $350-400/MT) especially when Chinese appetite for rice is expanding. Thai jasmine (aromatic) rice may touch $3,000/MT fob (now at $850-$900) if our Basmati exports drop significantly. Hopefully that state of affairs will not arise despite poor monsoon due to more than sufficient carry-in inventory available with the government and in Indian markets.

Pakistan Rice Sellers Lower Some of Their Quotes; Other Asia Rice Quotes Unchanged Today

Pakistan rice sellers lowered their quotes for 5% broken rice by about $10 per ton to about $375-$385 per ton today. Other Asia rice sellers kept their quotes mostly unchanged today.

5% Broken Rice

Thailand 5% rice is indicated at around $365 – $375 per ton, about a $20 per ton premium on Vietnam 5% rice shown at around $345 – $355 per ton.

India 5% rice is indicated at around $385 – $395 per ton, about $10 per ton premium on Pakistan 5% rice shown at around $375 – $385 per ton, down about a $10 per ton from yesterday.

25% Broken Rice

p>Thailand 25% rice is shown at around $345 – $3505 per ton, about a $20 per ton premium on Vietnam 25% rice shown at around $325- $335 per ton. India 25% rice is indicated at around $350 – $360, about $10 per ton premium on Pakistan 25% rice shown at around $340 – $350 per ton.

Parboiled Rice

Thailand parboiled rice is indicated at around $365 – $375 per ton. India parboiled rice is indicated at around $365 – $375 per ton, about a $30 per ton discount to Pakistan parboiled rice shown at around $395 – $405 per ton.

100% Broken Rice

Thailand broken rice, A1 Super, is indicated at around $315 – $325 per ton, about $5 per ton premium on Vietnam 100% broken rice shown at around $310 – $320 per ton. India’s 100% broken rice is shown at around $280 – $290 per ton, about a $15 per ton discount to Pakistan broken sortexed rice shown at around $295 – $305 per ton.