With satisfactory progress of monsoon rainfalls prompting farmers to bring in additional area under basmati sowing, prices are set to fall lower going forward.
In some relief for consumers, basmati rice has become cheaper 12 per cent during the past one month due to an increase in the area under cultivation and cessation of fresh payments from US sanction-hit Iran, the largest buyer of India’s aromatic rice.
The fair average quality (FAQ) variety is currently quoting at Rs 72 a kg in the benchmark physical Delhi wholesale market, as compared to Rs 82 about a month ago.
With satisfactory progress of monsoon rainfalls prompting farmers to bring in additional area under basmati sowing, prices are set to fall lower going forward.
The ongoing payment stoppage by Iranian importers may pare India’s basmati exports to that country, which is facing economic sanctions from the United States.
“Indian exporters are currently executing old orders. Hence, there is no export problem as of now. But, importers in Iran have stopped fresh payments for the past one month, bringing new orders to a complete halt. As long as advance payments to their accounts continue, exporters would face no issues. But, fresh exports would be difficult. Indian markets have already started responding to Iran’s payment stoppage, and basmati prices shed Rs 10 a kg or 12 per cent the past one month,” said Sushil Jain, vice president, All India Rice Exporters’ Association (AIREA).
Informed sources said advance amounts of Rs 1,800 crore received from Iranian importers are lying in various banks accounts held by the Iranians in India. India’s basmati rice exporters would continue till payments from these accounts are exhausted.
“Basmati prices have declined in the last one month. But, future price movement would depend upon the progress of this year’s monsoon rain and farmers’ interest in sowing of basmati paddy,” said Anand Goyal, owner, Akash Rice Mills, a Delhi-based basmati rice miller, trader and exporter.
Meanwhile, India’s two commodity exchanges, National Commodity & Derivatives Exchange (NCDEX) and Indian Commodity Exchange (ICEX), have started futures trading in 1,121 varieties of basmati. The ongoing uncertainty and price volatility offer immense opportunities for traders, exporters and rice mills to hedge their price risk in futures.
Being a compulsory delivery contract with small trading unit of 10 tonnes and basic delivery centres in Karnal and Haryana, basmati paddy is trading at about Rs 42 a kg in the futures market.
“Apart from the Iran issue, Indian basmati rice exporters are also facing phytosanitary issues with the European Union, which poses a threat to ongoing exports. While there arr negotiations with the European Union on pesticide residue issues, overall basmati exports may decline this year,” said Gurnam Arora, joint managing director, Kohinoor Foods Ltd, the producer of Kohinoor brand basmati rice.
Basmati prices have been volatile the past few months. Prices fell when the US withdrew the waiver on India's dealings with Iran, then rose and are falling again.
Sanjit Prasad, MD & CEO, ICEX, said, “Basmati exhibits large price volatility, and could impact market participants to the point of business closure. The futures contracts in 1,121 varieties will help them deal with price uncertainty.”
India produces some 6.5 million tonnes of basmati rice, two-thirds of which are exported. Iran is the largest buyer of basmati rice, contributing nearly 25 per cent of India’s annual basmati exports.
