Global Rice News

Pakistan’s Rice Export Industry Sets Record with $1.12 Billion Revenue in 5 Months

Pakistan’s rice export industry is flourishing, as evidenced by the latest figures from the Pakistan Bureau of Statistics (PBS). During the first five months of the fiscal year 2023-24 (Jul – Nov), the country exported over 1.7 million metric tons (MMT) of rice, generating a record-breaking revenue of $1.12 billion. Not only is this the highest volume of rice exports ever recorded in the first five months of a fiscal year, but it also raises hopes for an even more prosperous second half of the year.

Industry insiders are optimistic that the strong performance will continue, projecting that the revenue for the full fiscal year could reach up to $2.7 billion. This would surpass the previous record of $2.5 billion set in 2021-22. In fact, there are even suggestions that export earnings could reach $3 billion if the industry manages to achieve its target of 5MMT in exports.

Part of this optimism stems from the average unit price of rice exports, which has remained above $575 per metric ton during the 5M-FY24 period. This level is in line with industry forecasts and suggests that the target revenue is within reach. These price levels have not been seen since the commodity super cycle of 2008-09, when Pakistan’s rice export earnings first exceeded $2 billion. Since then, the earnings have remained relatively stable in this range.

While basmati rice has traditionally been Pakistan’s flagship product, the current fiscal year has seen a surge in the export of coarse rice varieties. From July to November 2023, Pakistan exported 1.5MMT of coarse rice, which is 25 percent higher than the 10-year average for the same period. Additionally, in November 2023, coarse rice exports reached 0.61MMT, a 50 percent increase compared to the 10-year average for the month. The total rice shipments of 0.66MMT in November itself mark a historic high, although concrete data beyond 2010s is not available for comparison.

Despite these promising developments, challenges loom on the horizon for the rice export industry. The recent decline in prices of basmati rice in the international market by 36 percent since January 2023 raises concerns. Similarly, the prices of coarse rice varieties, including those from Pakistan, have started to level off and face potential downside risks. Reports from India suggest that the Indian government may ease restrictions on their coarse rice exports, which could intensify competition and pose a threat to Pakistan’s rice export prospects.

Competition from across the border aside, Pakistani rice exporters also face financial risks. The industry has relied heavily on short-term credit from banks, with credit to the rice industry increasing by 15 percent compared to November 2022 and 30 percent compared to October 2023. Analysis by BR Research indicates that borrowing by the rice industry has surpassed the levels seen in 2021-22. Although this borrowing trend is justified given the higher prices and crop output, it is important to note that the average borrowing rate has surged to over 21 percent, compared to the under 7 percent rate during the borrowing boom in Q4-2021.

Since much of the borrowing is done through seasonal cash financing lines, the industry may face margin calls on its overdraft lines if commodity prices in international markets suddenly drop. With interest rates exceeding 20 percent, it may be challenging for the industry to remain profitable under such circumstances. To ensure a successful year for rice exporters, either borrowing rates need to decrease or the average unit price of exports must maintain its current momentum and hover around $600 per metric ton. If these conditions are not met, the industry’s expectations for 2024 may not materialize as hoped.

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