RICE STOCKS IN 'GREEN' DESPITE 'RED' FROM USA

By Ruma Dubey

There is a report in Economic Times today which says that USA has found pesticide residue in basmati rice and exports to the country from India have plunged. This is not good news, right? In an ideal world, the stock price of basmati rice exporting companies should have plunged, right? Well, we do not live in an ideal world and therein lies the entire truth of our times. Rice stocks, the major basmati exporters – LT Foods, KRBL and Kohinoor – all are up strongly in the green. If one looked at the stock prices of these companies one would not even have an inkling that there has been some untoward development.

So why is the market not reacting to this news at all? Many in the industry feel that USA is pushing the panic button for no valid reason. Those in the basmati rice export business say that India uses four pesticides for basmati rice -  Buprofezin, Carbendazim, Isoprothiolane and Tricyclazole. India exports to other countries too, like Japan and European Union. When exports are made, a random testing of the consignment is done as stipulated by WTO and Codex Alimentarius, which is set up by FAO and WHO, the agencies that set the international food standards. They have something known as the Minimum Residue Limits (MRLs) and Japan and EU have much higher minimum threshold, mores than even USA. Now these two regions, which are also trading partners of USA, have found no issues with our basmati exports. And yet, USA seems to have a problem? The testing which even USA conducted, revealed that the MRLs were much below their thresholds, yet it has insisted that basmati rice exports from India should not have random testing but 100% testing, which means that every grain of rice needs to be tested. This means companies have to spend more on testing and the waiting time for exports to happen takes longer time. And all this despite India not really being at a fault. One wonders why this step motherly treatment by USA? When it is ok for Japan and EU, how come it is not OK for USA?

USA has stated that this stringent 100% inspection of basmati rice from India was imposed because it contains residue of 11 pesticides and of these 10 are not registered with USA and 3 of these 10 do not have any prescribed MRL. It seems around 90% of the shipments were currently being rejected due to use of tricyclazole, a pesticide manufactured by Dow Chemicals, which is ironically, an American MNC!  Dow has submitted some safety report to USA 6 months ago and India is hopeful that things will get resolved soon.

But the question is not about USA but more about why the basmati rice exporters are nonchalant about this move by USA. Well, India exports to USA but its biggest market is Iran and West Asia. India annually exports around 2.5 to 3 million tones of basmati rice. As per data put out by All India Rice Exporters Association (AIREA), the last update for FY12 shows that India exported maximum basmati rice to countries in the Middle East –Saudi Arabia, Yemen, Kuwait, UAE, Iran and Iraq. Exports to UK at 77,384 metric tones (MT) were more than that to USA at 47,498 MT. So clearly, the companies are not too perturbed because exports to USA are not exactly like our IT sector.

The rice exporters are looking forward to a good season this current fiscal. In FY13 exports rose 10% and for FY14 they expect to sell higher volumes and this is thanks to the new high-yield variety of rice developed by Punjab Agricultural University, known as Pusa 1509. In FY13, demand outstripped supply but in FY14, the rice exporters are sure that this new variety will help meet the increasing demand and expect exports to grow by around 10% in current fiscal.

In 2011, India was crowned the top rice exporter of the world and this year, if Russia lifts the import ban (ban was imposed after it detected copra beetle infestation ) India could once again emerge the topper. Last two years, gaur gum was the largest agricultural export from India and this year, if Russia removes the ban, basmati rice could top the list. Currently a Russian delegation is in India, inspecting the rice mills.

Well, all this explains why rice stocks remain in the green despite this trouble from USA! And it is good to know that we have some exports which are not so totally dependent on USA!