RICE COULD SEE A PRICE RISE - BLAME IT ON EL NINO!

By Ruma Dubey

The drought all around India is sure to affect all crops and rice is one such foodgrain which could see some very sticky times.

The blistering heat is today threatening to cut production of the rice crop for the first time since 2010 and effectively lead to a price rise. With more than 50% of the world’s population eating rice, this is not exactly an appetizing news.

India is the top exporter of rice in the world, followed by Thailand and third by Vietnam. All three regions are facing extreme heat waves and this rice bowl of Asia could soon go empty.

It is like as though we have rush now to the hyper markets and rush to stock up on rice as we currently have the surplus stock harvested in the previous season. On April 1, food grain stocks, mostly consisting of wheat and rice, held by Food Corporation of India (FCI) stood at 36.69 million tonne (MT), against the buffer norm of 21.04 MT. FCI had rice stocks of 22.16 MT, which excludes about 6.7 million tonne of rice yet to be received from millers. As per the stocking norm for April 1, the FCI should have a rice stocks of 13.5 MT.

But this will soon get over and by end of the year, we could see supply shortages and a price rise. According to data released by the US Agriculture Department, rice inventories with the top three exporting countries could fall by about a third by end of 2016 to around 19 million tonnes. If this indeed comes true, it would mean we could witness the biggest drop in rice stock since 2003.

When there was a rice shortage in 208 due to El Nino, the same culprit this year, price of rice had shot up to around $1000/tonne. Today, it much lower – hovering around $389-90 levels but this price is highest since July’15.

In India, the next or the second harvest of the crop will now happen in September. Thus prices could see a rise from June till the harvest and more if the same heat wave persists.

For India and the rice exporters in the country what this could mean is that we could probably see either an export limit or ban if indeed the shortage happens and prices rise. Punjab is the basmati rice badshah, accounting for 70-75% of the entire country’s basmati output. 

Export prices will go up only if demand rises and we are able to offer rice at a rate lower than that offered by Thailand. Exports are expected to be robust, with demand from China and Japan too. Thus export price will get determined as demand increases.

This is good news for companies like KRBL, LT Foods and Kohinoor Foods and mainly Lakshmi Energy Foods (listed on NSE) which is mainly a non-basmati rice processing company.

All in all, looks like an aromatic rice plate is getting ready, on the slow flame. Best to get your plates ready to spoon in!