Question

Covid-19 lockdown: Indian rice exports suspended on supply chain disruption
Reuters

Last updated on April 6, 2020 at 07.21 am
Indian rice traders have stopped signing new export contracts amid the nationwide lockdown to curb the spread of coronavirus, as labour shortages and logistics disruptions have hampered the delivery of even existing contracts, industry officials said.
The halt in exports from the world's biggest exporter is allowing rival countries such as Thailand to raise shipments in the short term and lift global prices, forcing millions of poor consumers in Africa to pay higher prices.

"Shipments have stalled as transport has become very difficult because of the lockdown. Drivers are not coming and labour is not available at mills and ports," said B.V. Krishna Rao, president of the Rice Exporters Association (REA).

Indian traders have stopped offering quotes to overseas buyers as they are not sure when they would be able to ship their cargoes, four top exporters told Reuters.

India's export volumes have fallen by four to five times, said Prem Garg, chairman of the Lal Mahal Group, which exports rice to more than 44 countries.

India will gradually pull out of a three-week lockdown in phases, Prime Minister Narendra Modi has said.

About 400,000 tonnes of non-basmati rice and 100,000 tonnes of basmati rice, meant for March-April delivery, are either stuck at ports or in the pipeline due to the lockdown, exporters said.

New Delhi mainly exports non-basmati rice to Bangladesh, Nepal, Benin and Senegal, and premium basmati rice to Iran, Saudi Arabia and Iraq.

As Cambodia, Vietnam and Myanmar curbed their rice exports, demand for Indian rice surged, but traders are not signing new contracts, said Nitin Gupta, vice president of trader Olam India's rice business.

Thailand, the only key exporter to offer rice currently, has seen its export prices soared to their highest in seven years this week.

Before the lockdown, India was offering 5% broken parboiled variety   at around $365 per tonne free-on-board basis. Thailand is now been offering the same grade at around $540 per tonne.

"After the lockdown, there will be a huge demand for Indian rice, as India is in a sweet spot in terms of offering competitive prices," said Olam's Gupta.

Since India has vast surplus stocks, it could start cashing in on demand once labour shortages ease, said REA's Rao.

India's rice exports in 2019 fell 18.1% from a year earlier to 9.87 million tonnes, the lowest in eight years, as demand moderated from key Asian and African buyers.

India is likely to produce 117.47 million tonnes of rice in 2019/20 against an annual consumption of about 100 million tonnes, with state inventories at 31 million tonnes. If the lockdown is extended, or the pandemic spreads among key buying nations, denting demand, India's rice industry could suffer major losses, said large exporter Vijay Sethia.

Question 5:

While using real data, discuss what factors can explain why India exports two different of rice to two different market?

Answer 1

The basic difference between basmati and non basmati rice are -

1. Aroma and elongation

2. Basmati rice has a specific length and shape while non basmati rice can have any shape.

3. Basmati rice take 160 days to grow while this time period is quite low for othe rice.

4. Basmati rice are grown only in the states of UP, Haryana, Punjab and J&K. Other kinds of rice are grown in almost every state.

All the above factors contribute to exports of rice.

The basmati rice thus is much costlier, takes longer time to grow and is grown only in specific places.

One key point here is that basmati rice is grown only in specific areas of India and in a smaller region of Pakistan too. Thus other key players like Thailand and Vietnam cannot tend to give any sort of competition in this category.

Countries where basmati rice is exported -

Saudi Arabia, Iran, UAE, Traq, Kuwait, U.K, USA, Yemen Republic, Oman, Canada.

Countries where non basmati rice is exported -

Bangladesh, Australia, Bahrain, Ethiopia, Djibouti, France, Germany, U.K.

Factors determining category of rice being export -

1. Cost of basmati is much higher than non basmati.

2. The cultivation of basmati rice is much lesser than non basmati hence difficult where demand is much higher.

3. Purpose of rice being used for. A dish like biryani always requires basmati rice. This dish is very common in Middle East apart from India.

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