The Decline of Rice Exports: Past its Peak
Published on: March 22, 2024.
Filed under:
During the fiscal year 2023-24, Pakistan’s rice exports have seen a significant boost. Not only have foreign exchange earnings from rice exports nearly doubled compared to the previous year, they have also surpassed the 10-year average. Additionally, the quantity of rice exported has increased by almost 50% during this period. This is a remarkable achievement for Pakistan’s export sector and stands out in the global commodity trade.
It is rare for a country to experience such a quantum leap in its share of world trade while also raising the selling price by almost 30% per unit. It’s important to note that these figures do not take into account the earnings from currency depreciation, which has devalued by 24% during the 8MFY24. This has created a favorable environment for rice exporters in Pakistan.
However, the positive news comes with some challenges. Agricultural production is finite, meaning it cannot be instantly scaled up to meet growing demand. By the time producers are able to increase supply, competitors with larger scale often flood the market, leading to a sudden crash in prices. Even though India has banned rice exports, Pakistan has been experiencing a decline in its rice exports over the past three months. There has been a 15% contraction each month since December 2023, after reaching a peak of 0.85 million metric tons. In February 2024, the volume increased by only 10% compared to the same month last year, which is significant but not as impressive as the 135% increase recorded between October 2023 and January 2024.
The reality is that while the international market continues to have tight supply-demand dynamics, Pakistani rice exporters no longer have sufficient stocks to meet the global demand. Supply side constraints have come into play, leading to a decrease in the monthly export volume trends. Historically, the export volume for February has been twice that of September of the previous year, which is when the marketing year begins. This pattern continues this year, but with an elevated base.
The tapering of rice exports has begun, and although a record volume of 5.5 million metric tons is expected to be exported this year, the future is becoming more uncertain. It took the Pakistani rice industry one year to bounce back from its lowest production in six years to achieve the highest exports in history. It is possible that the Indian government could lift export restrictions after the general elections in April 2024, affecting Pakistani rice exporters.
The outlook for the next fiscal year is uncertain, and it is important for the market to acknowledge this reality. While the party may continue until the end of this fiscal year, there is a possibility that it could come to an abrupt halt if the Indian government lifts export restrictions as a result of political considerations. It’s important to consider these factors when evaluating the market.
Source: [^https://www.brecorder.com]
