Traders compete with FCI for stocks; currency movements, too, sway prices
Export prices of Indian white rice have increased by over 10 per cent over the past fortnight to nearly a 30-month high. The surge in prices is in view of the Food Corporation of India (FCI) procuring more rice for the central pool and global currency movements, exporters and traders said.
The Centre’s decision to end the distribution of free grains under Prime Minister Garib Kalyan Anna Yojana (PMGKAY), which is in addition to the normal supply under various welfare schemes, has also resulted in the prices rising, they said.
This is because those who were getting rice under the scheme are now seeking rice from the open market.
Near MSP levels
“Exporters have to compete with the FCI to get rice. This has pushed up rice prices. Once it ends procurement, we could see some correction,” said New Delhi-based exporter Rajesh Paharia Jain.
FCI procurement of kharif rice is 20 per cent higher year-on-year, he said.
“Parboiled prices have increased by 30 per cent in the past couple of weeks to ₹29,000 a tonne from ₹22,000. Talks of Bangladesh buying rice under a government-to-government deal have pushed up the price,” said VR Vidya Sagar, Director, Bulk Logix.
According to data from the Agmarknet portal, a unit of the Agriculture Ministry, paddy prices were up at ₹2,419.46 a quintal last week compared with ₹2,054 a year ago. This year, the MSP for paddy has been fixed at ₹2,040 for the current crop year to June.
Data from the Consumers Affairs Ministry show that the average wholesale price of rice is currently ₹3,328.43 a quintal, up 9.12 per cent year-on-year.
Most of the rise in the price happened in the past week, he said.
“Rice prices have increased to near minimum support price (MSP) levels and this has resulted in export prices surging,” said BV Krishna Rao, President, The Rice Exporters Association.
According to the Thai Rice Exporters Association, India’s 5 per cent broken white rice price has increased by $40 a tonne since the third week of December to $443-47 a tonne. The price of 25 per cent broken white rice has gone up by $50 to $428-32.
Only parboiled rice has not witnessed such a rise, though its prices have risen by $15 to $388-92 a tonne. Despite the surge in prices, Indian rice is still the most competitive. However, the Indian cereal currently holds only a $15/tonne advantage over Vietnam.
“Indian white rice prices will top $450 in a week’s time once the markets open up abroad after the Chinese lunar New Year. We have to see how the Vietnam market opens on February 1,” said Bulk Logix’s Sagar.
Good for sector
Exports to Africa are taking place, though there is a general shortage of supplies in the market, he said.
TREA’s Rao said the increase in rice prices is good for the industry since only “actual millers” are buying in the domestic market. “Various States such as Tamil Nadu are buying rice from the open market, pushing up prices,” he said.
“Prices have increased despite the arrival of new crop in West Bengal. We are exporting rejected grains from parboiled sortex,” said M Madan Prakash, President of the Agricultural Commodities Exporters Association.
Even prices of such grains have increased to nearly $320 free-on-board (f.o.b).
Set to cool
However, the current trend may not hold for long since “the surge” is not sustainable, said Sagar.
“Prices are likely to correct once the Vietnam market opens,” he said.
“The market is caught between two rice seasons in Thailand. Once the new crop arrives there, prices will cool down,” said Rao.
“Once FCI ends its procurement, it will be only traders in the market. It will bring down prices,” said Jain.
But a trade analyst, who did not wish to be identified, was sceptical saying, “the market sentiments are based on physical supplies. Looks like the data on production may not be right.”
Rice prices are up since the production during the kharif season has been estimated lower at 104.99 million tonnes (mt) this year compared with 111.76 mt last year. This was because paddy sowing was affected by deficient rains in West Bengal, Odisha, Jharkhand, Bihar and eastern Uttar Pradesh.
According to data from FCI, rice stocks are at an 8-year low of 12.35 mt as of January 1 but unmilled paddy stocks are at a record high of 47.62 mt (31.9 mt of rice).
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