By Ruma Dubey

While you tuck into your delicious biryani or eat the humble rice plate – just remember – you are probably eating rice which is set to rule the world! Yes, India is throned as the new King of rice around the world, beating even Thailand and Vietnam.  

With only news of doom and gloom spread around, this news comes as a pleasant surprise; it has nowadays become so rare to hear good news that one tends to doubt the very veracity of anything good! But for a change this news is true and the biggest change is that two Govt’s have been responsible for this. The Indian Govt for once did something right, In Jan, it allowed export of non-basmati rice and the Chinese Govt, April, allowed imports of rice. Thus both factors together, fortunately both in the same direction has immensely buoyed the rice industry in India.

The Chinese typically prefer the sticky rice, known as Jasmine rice and imports it mainly from Thailand and Vietnam. It exports a small quantity of basmati rice from Pakistan and now India has a huge opportunity. Though the exact market size of China is not known, given the population and the size of the country, surely the potential is big. India has a huge price advantage when it comes to non-basmati rice exports and this is working in its favour.  And it is expected that demand for rice will spill over to basmati rice too.

This has immediately led to a spike up in the price of basmati rice. In the last three weeks alone, basmati rice export prices have gone up almost 30%. Rice is harvested between November and mid-January. And as soon as it is harvested, farmers sell if off to the traders.  In 2010-11, India exported 6.5 million tonnes of basmati rice and in 2011-12, India is expected to export 15% more,  7.5 million tonnes.  Punjab is the basmati rice badshah, accounting for 70-75% of the entire country’s basmati output. 

This is one sector where we can clearly see how if the Govt decides to wake up from its comatose state and pay attention to the needs of the sector, wonders can be achieved and be it Europe or USA, we can still trudge along with strength. This elevation of status for India, as the world’s king rice exporter happened only because in Jan’12, the Govt lifted the ban on export of non-basmati rice. And since then, beginning Feb, every month, India has exported around 6,50,000 to 7,00,000 tonnes.  On the other hand, exports from Thailand, which last year, in the first half, was at an average of 10 lakh tonnes per month, has slipped to around 4 lakh tonnes/month since the beginning of this year. Vietnam, the other big rice exporter, last year was exporting, at an average, around 6 lakh tonnes/month and this has slipped to 3 lakh tonnes/month this year. Demand has gone down so much that Vietnam has cut its price by around $150/ton to get more buyers.  

The other big rice exporter is Pakistan. It has exported about 30 lakh tons of rice – 23 lakh tons of non-basmati and 7 lakh tons of basmati since July, 2011. It is targeting 40 lakh tons by the end of the year, which ends in June. It is a big exporter to Malaysia, where last year, it exported about 148,000 tons rice to Malaysia, up about 20% from the previous year.

So will rice hit the roof? Supply is expected to be more than comfortable. According to Food Corporation of India, the country will have a bumper crop this year, up 7.7% to 103.4 million tonnes and state reserves are up 21% at 53.4 million tonnes. Globally, production for 2012 is expected at 732.3 million tonnes v/s demand for 477 million tonnes.

Price of rice in the state of Tamil Nadu has risen due to acute power shortage, as it is affecting rice milling. But this is more of a domestic issue. 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!