India?s basmati rice shipments may rise only marginally to around 2.7 million tonnes (mt) in 2011-12 despite a bumper harvest and a sharp depreciation of the rupee, mainly due to a lingering payment problem with key buyer Iran and high floor price for exports, trade executives said on Wednesday.
Traders in India and Iran have been finding it difficult to undertake financial transactions for basmati trade after the Reserve Bank in December 2010 stopped Iran-related payments through a regional clearing house that the US says Tehran is using to avoid global sanctions imposed due to the nation?s ambitions to build a nuclear arsenal.
The country exported around 2.3-2.5 mt of basmati rice in the year through June 2011. Iran accounts for around 40% of India?s basmati exports.
?The problem of delayed payment from Iran continues. Earlier, some payments were routed through Dubai. But with Iran and Dubai relations being strained politically, payments for basmati supplies have also been affected,? said an export house executive.
The gains from a weak rupee and good domestic supplies have almost been offset by the delayed payments as well as a sharp depreciation of the Iranian currency. The rial depreciated around 30% against the dollar in December alone, highlighting persistent concerns about further global sanctions and making overseas purchases dearer for Iran, said the executive.
Domestic supplies have been adequate as the country?s basmati rice output is expected to touch last year?s record level of around 4.5mt. ?Apart from the Iran payment crisis, the high minimum export price set by the Indian government has spoilt the party for us to some extent,? another trade executive said.
India has set the benchmark floor price for export at $900 per tonne to keep local supplies steady. But with local prices crashing to around $700-725 a tonne after a bountiful summer harvest, traders are finding it difficult to ship the grain, he added.
The executive said a lucklustre performance by India, the world?s largest supplier of the aromatic rice, will give an edge to rival Pakistan, which has been aggressively seeking supply orders to capture a bigger chunk of the basmati export market.
?Pakistan doesn?t have an MEP (minimum export price) on basmati, so they have the advantage of selling the same grain at a cheaper rate when prices in the local market go down. But we can?t do that,? he said.
The executives said competition has intensified between India and Vietnam for a greater share of the global non-basmati trade to take advantage of soaring prices in top exporter Thailand due to floods and some populist measures aimed at helping farmers there.
The 30% broken Indian rice is ruling at around $383 to $390 per tonne, compared with $425 to $430 per tonne of the 25% broken Vietnamese rice, while 25% broken Thai is quoting around $525 to $530 per tonne. The Indian prices have dropped by around $50 per tonne since the government lifted a more-than-three-year ban last year.
Both Thailand and Vietnam account for more than a half of the annual global rice trade of around 30 mt. While Thailand exports around 10-11 mt, Vietnam ships out 6-7 mt a year. India can easily export 4 to 5 mt in 2011-12 and become the third-largest exporter. ?Indian traders didn?t face much problems in recapturing the export market, as it?s a price-elastic commodity. Whichever country is offering rice at good price, buyers will be shifting to it,” said one of the executives.