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Decline in rice exports

July 15, 2013

PAKISTAN’S rice export trade suffered a setback last month when Mexican customs officials quarantined 3,000 metric tonnes of its rice after discovering the Khapra beetle in shipping containers at the port of Veracruz.

The rice exporters’ body of the country immediately dubbed the Mexican move a part of propaganda by American-Mexican lobbies to drive out Pakistani commodity from the region because it is $100 per tonne cheaper than the US rice.

Their leader, Jawed Ghauri, sought Islamabad’s intervention for release of their 150 containers berthed at Mexican ports and more than 780 rice containers, which were in transit to Mexico. The containers are believed to be worth millions of dollars.

The contaminated rice has left the port in the last week of June to be returned to Pakistan, according to US media reports. Mexico’s National Service of Health, Safety and Food Quality (SENASICA) was considering the fate of additional containers of Pakistan rice which were at port that have been inspected and declared free of the Khapra beetle or Trogoderma granarium. SENASICA was about to decide what actions it should take about these containers: should they be fumigated and allowed to enter Mexico or whether some other action was necessary, including not allowing their entry.

The Khapra beetle is a destructive pest of grain products and seeds and is considered one of the 100 worst invasive species in the world. Mexico will not want to risk introduction of this highly destructive pest, as it can cause damage to local crops.

The transit period from Pakistan to Mexico is around 70 days and Pakistani rice is properly fumigated to ward off khapra beetle at home. However, if transit time exceeds this, there is a chance of contamination. Mexico imports 70 per cent of the 100,000 tonnes of rice it needs per annum.

The Mexican setback comes at a time when Pakistani rice, including Basmati, is not faring well in the international market mainly on account of low quality and high price. During the last four years the country has lost considerable share in traditional buyers of its basmati rice.

These include the UAE, Iran and UK. Non-basmati exports have also been on decline but demand from China has helped compensate for losses in other markets so far.

But, of late, even rice exports to China are also facing stiff competition from Vietnam whose grain is ahead in respect of price and quality.

In April, Rice Exporters Association of Pakistan (Reap) had described China as “a bright spot in otherwise gloomy year for Pakistan.” But it seems the situation is changing fast. The recent cut in Vietnam’s prices has hurt Pakistan’s rice exports. While more and more importers from China are turning to cheaper rice from Vietnam, prices of Pakistani rice are going up due to hoarding. Some cases of low quality rice being exported to China have also been noticed. Exporters say that Pakistan has almost lost a lucrative market to Vietnam due to greedy attitude of some elements.

Last year, Pakistan exported about 580,000 tonnes of rice to China, but Vietnam’s exports amounted to 1.54 million tonnes or about 66 per cent of China’s total rice imports. China’s rice needs are expected to grow to about 2.5 million tonnes in 2013-14.

The only hope for Pakistani traders to come out of their current predicament at the moment is ironically based on a rise in domestic prices of rice in India, their main competitor, which, as a corollary, will raise their export prices and create a fair competitive environment for Pakistan.

A major reason behind the falling trend in exports is domination of hoarders, profiteers and black-marketeers in the rice trade who carry on their business with the support of influential persons in the government. There is little support at the government level to solve problems of exporters.

In India, exporters get enormous government support in solution of their problems, get subsidy on fertiliser and are given tractors at a low cost. In the first half of the just-ended fiscal year, Pakistan’s rice exports suffered a fall of about 53 per cent.

During the whole 2012-13 fiscal year, rice exports earned $1.84 billion as compared to $2.08 billion in the previous fiscal year.

During the last five years, country’s rice production has declined by about 20 per cent to 5.54 million tonnes. Lower production caused a significant decline in exports of the grain.

One reason for this decline has been the attitude of the government institutions which almost ignored the need for research to produce more quantity of rice and also to introduce new varieties of rice seeds.

The result was that growers gradually began reducing the sowing area during the last five years. They cultivated rice crop in an area of 2.31 million hectares in the outgoing fiscal year 2012-13 against 2.96 million hectares in 2008-09 — showing a decline of around 22 percent.”

Similarly, area under basmati paddy in Punjab, which accounts for over 90 per cent of its national production, has declined by 34.5 per cent to 1.89 million acres in 2012-13 from 2.89 million acres in 2008-09. It is a loss of around one million acres of basmati area in just five years.

In fact, the country loses about two lakh acres of basmati area every year and no one in the government takes notice of this development.

Basmati has always enjoyed a dominant status in Punjab’s agriculture. It claimed 81.31 per cent share in the area under rice in 2008-09, which has now come down to just 60.05 per cent. Production of basmati has also reduced almost proportionately during this period.

The lower production, it is evident, caused a significant increase in the price of the commodity at the local markets. And higher price did not encourage exporters to sell higher quantity of rice in the markets abroad.

The result is that Pakistan is no longer competitive in the international rice market after India and Vietnam started selling the grain at lower prices.

They produce rice in bulk quantity that allows them to keep their cost of production lower and sell it at a competitive price. —Ashfak Bokhari