Are Rice Exports Nothing to Be Excited About?
Published on: October 30, 2023.
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Rice Exports from Pakistan Witness a Decline in Q1 FY24
Despite expectations of a successful fiscal year 2023-24, the first quarter (Jul-Sep) of rice exports from Pakistan has been disappointing. According to the Pakistan Bureau of Statistics’ monthly trade report, rice exports volume during Q1-FY24 dropped by 18 percent compared to the same period last year. While the country managed to maintain its export earnings from Q1-FY23, the decline in quantity demanded at higher prices raises concerns.
The decrease in exports during Q1 can be attributed to the significant damage caused by monsoon floods in 2022-23. The floods resulted in a 25 percent decrease in rice exports, with estimates suggesting a loss of two to four million metric tons of rice crop. As a result, the Economic Survey of Pakistan projected a 21 percent decline in national rice production, while the US Department of Agriculture estimated a 42 percent drop in output.
Despite the low base of the previous year, Pakistan’s export performance worsened, indicating larger challenges beyond price increases. It is worth noting that the average unit price of exports in Q1-FY24 was only 10 percent higher than Q1-FY23, which does not explain the decline in volume. In fact, the volume of rice exported is the lowest in the past five years.
However, it is important to understand that rice cultivation in most of the Indus basin takes place from May to June, with the harvest cycle extending until October-November. Therefore, the bulk of rice exports typically occur in the second half of the fiscal year. In the last decade, the ratio of exports in the first half (H1) to the second half (H2) has averaged at around 40:60. A higher share of exports in H1 usually correlates with lower annual exports, indicating poor crop output. Therefore, Q1 (Jul-Sep) is often considered the last quarter or Q4 of the rice marketing year or season.
During these months, many rice export participants are still selling off last season’s inventory. Therefore, the poor performance of rice exports in Jul-Sep 2023 can be considered natural and expected. The concern lies in the unit prices achieved during this period.
Discrepancy in Unit Prices of Pakistani Rice Exports
According to the World Bank’s commodity price tracker, rice prices globally have increased by an average of 36 percent to 54 percent during Jul-Sep 2023 compared to the previous year. However, the average unit prices obtained by Pakistani exporters during the same period have only increased by 10 percent. Notably, while the average export unit prices of basmati rice rose by 14 percent, the export price of non-basmati rice increased by just 3 percent, or $15 per metric ton. In contrast, the price increase for non-basmati rice varieties in world markets ranges from $130 to $190 per metric ton!
This significant difference between global and Pakistani coarse (non-basmati) rice prices raises concerns, especially if the trend continues. Pakistani rice exporters may be missing out on the opportunity to generate substantial inventory gains by selling last year’s carryover inventory at current prices.
It is crucial to monitor the situation in the coming months as the new crop enters the market. The large gap between global and Pakistani rice prices should alert authorities to potential under invoicing practices.
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