With export prices of basmati declining, it has fuelled speculation about the sustainability of some exporters who purchased basmati paddy at a high price expecting export realisation to move up amid conflict in the Middle East. The average export realisation has dropped to below $875/tonne this month from over $1,040 in September, when the government scrapped the minimum export price (MEP).
“The government should restrict cheap export, even if required unofficially as the brand ‘Basmati’ is taking a hit when in the name of competition some exporters ship at a low price to their overseas buyers. The quality will also take a hit when exporters cannot ship the consignment below the procurement and handling cost,” said a trade source.
Below $700 to Iran
It is learnt that some quantity of basmati to Iran has been sent below $700/tonne this month, whereas exporters realised average $900-950 from markets in the UAE and Saudi Arab.
Sources said Apeda (Agricultural and Processed Food Products Export Development Authority) has tried to check cheap exports of basmati by getting in touch with those who had contracted at low rates, but there were excuses for deals having taken place to offset previous trade deals. However, there is a need to find some solution, like enforcing an MEP or strict quality checking, the sources said.
According to industry data, India exported $562 million worth of basmati in December 2024, about $380 million in November and about $510 million in October. Though the Basmati crop harvest began from last week of September, most of the arrivals took place during October-December quarter of 2024.
Micro factors
Apeda data show basmati exports during April-December of the current fiscal were 4.24 million tonnes (mt) worth $4.32 billion against 3.54 mt worth $3.97 billion a year ago. Though industry sources said exports could have dropped or been at last year’s level had the MEP been retained, a section of the trade favours a check on unwarranted competition that drives down the export realisation.
“After removal of MEP, the basmati rice export realisation has witnessed a decline of $250 per tonne. If the current price realisation is compared to previous seasons of MEP imposition, it is around $150 per tonne. The factors contributing to the decline is not macro but micro and exercising quality control measures with a review of the trade strategy is essential in order to protect farm income and export investment,” said basmati trade expert S Chandrasekaran.
