Prices of traditional basmati varieties have soared in the global market by 100 to 120 per cent since 2006, according to the London-based Rice Association.
“Prices of evolved varieties have doubled since September 2006 and strong demand means higher prices are likely to be maintained,” the association said in a report titled Rice Market Situation.
The ban on genetically modified rice in the European Union market in 2006-2007 increased demand for basmati not just there, but also in the Middle East and the United States.
According to the report, basmati yield is three-fourth lower than ordinary long grain rice and so it commands a higher price. Moreover, crop problems in 2006 further restricted supplies, with growing demand within India as economic growth started taking hold.
With increasing demand for rice, production has been struggling to keep pace.
Worldwide buffer stocks that have ensured the continuity of supply whenever there is a shortfall from weak harvests in a region have fallen to their lowest levels for decades. This has led ordinary long grain paddy rice prices to rise by an average of 60 per cent over the last 12 months.
The situation with basmati has been particularly acute with paddy prices doubling in the past 18 months.
Declining stocks as global demand for rice has exceeded supply in each of the past six years; growing population, especially in rice consuming countries; increasing wealth in India and the Middle East have boosted demand for basmati rice are some of the main factors leading to increase in prices, according to Indian exporter Tilda International.
According to India’s Economic Times, the Indian Government has a proposal to impose export duty on basmati rice to make exports unattractive. The measure, part of a multi-pronged strategy being discussed by the government, could serve the double purpose of discouraging exports while raking in revenue for the government.
The government has already banned the export of non-basmati rice recently as raising the minimum export price for the commodity several times in the last few months did not help in checking prices. The Cabinet Committee on Prices, in its last meeting, also imposed an MEP of $1,200 per tonnes on basmati rice.
The country exports more than 70 per cent of the basmati it grows. Export during April-November 2007, was 648,000 tonnes, valued at INR20.3 billion (Dh1.8bn).
The acreage of basmati sown is gradually declining in part due to competition from other crops that are more profitable for farmers. Traditional Basmati is a difficult crop to grow requiring more labour and other inputs than alternative crops farmers can grow. In recent years, there has been strong competition from sugar cane production, which has a duel use as biofuel.
Deepak Thawani, marketing manager, Tilda International, said: “The 75 per cent basmati paddy price rises witnessed with the November 2006 harvest were exacerbated by the appreciation of the rupee by 14 per cent against foreign currencies and prices continued to climb to 55 per cent over the season’s opening.
“In November 2007, we might ordinarily have expected to see a correction in the market as more farmers grew basmati. But that did not take place. The price of other commodities also rose over the same period and farmers have continued growing alternative crops.”
In the local market prices of basmati have increased to Dh10-12 per kg from Dh7-9 in the past six months.
Tilda has invested in research to discover the best techniques for growing traditional basmati at their experimental farm called “Foster”. “The research results are shared with farmers through Tilda’s agricultural extension programme called the Farmers Advisory Cell,” said Thawani.
The fragrant one
Basmati is a variety of long grain rice, famous for its fragrance and delicate flavour.
Traditional basmati plants are tall and slender, and their stems are prone to breaking in high winds. They have a relatively low yield, but produce high-quality grains and command high prices in both Subcontinent and international markets.
The grains of basmati rice are longer than non-basmati varieties. Cooked grains of Basmati rice are characteristically free flowing rather than sticky and are available in two varieties – white rice and brown rice.
World rice prices have been rising strongly despite record production of around 420 million tonnes, but consumption has been increasing at a much higher pace at 423 million tonnes, according to the Rice Association.
Global rice stocks are falling and are at lowest level since 1983-1984, with US stocks at lowest since 1974. Moreover, stocks to use ratio is estimated to be at 17 per cent, which is down by half in six years.
Egypt has banned all rice exports from end of March 2008, having previously imposed price controls in January. Vietnam banned exports in autumn 2007 and is imposing strict controls on exports from its new (March 2008) crop, while Cambodia has also banned all rice exports. China is restricting exports in favour of domestic market, as Thailand and Uruguay are also rationing supplies.
The world rough rice index has risen 90 per cent in two years of which 60 per cent has increased in last six months.
Container freight costs remain at near record levels, increasing costs into European Union as prices of Spanish and Italian rice varieties have risen by 80 to 100 per cent since September 2005. Chicago rice futures have reached record levels – four times higher than it were in 2003.
Prices of basmati rice up 120 per cent since 2006