Fudging the numbers

Published September 19, 2022

Lives have been lost, crops have been destroyed, and there is doom and gloom across the country. However, rice has escaped the worst and is headed towards record numbers.

“What we have been hearing from the private sector and people on the ground is that in the worst case scenario, rice suffered 20-30 per cent losses,” says a former chairman of the Rice Exporters Association of Pakistan (Reap), requesting anonymity.

This amount to about 500,000 acres. As a rule of thumb, one tonne of rice is exported per acre, so about half a million tonnes of exportable rice has been lost. Last year, Pakistan’s exports were at 4.7m tonnes — this year the exporters predict the number will fall to 4-4.2m tonnes.

Basmati bonanza

“Basmati’s major sowing area is Punjab, particularly Southern Punjab, which escaped flooding,” says a rice exporter. “On the other hand, the rain was beneficial for the crop.”

Death and destruction aside, rice is actually doing well amidst the floods

The yield of long-grain rice increased by 15-20pc per acre since the cool water from the rain helps it grow. Extrapolating the trend, exporters expect Basmati’s yield to increase by about 20pc when its harvest season starts next month.

The quantum of rice affected in flood-related areas of Sindh was about 300,000 tonnes, says an insider of the sector. However, the damage is limited to about 50pc because rice is a water-intensive crop. When the water receded, about half of the inundated areas had the crop still standing and thriving.

Pakistan produces about 2.5m tonnes of Basmati rice of which about 150,000 tonnes were affected. Traders hope that the increase in yield will offset the losses. “We expect over 4 million tonnes of exports in the current fiscal year which will generate over $2 billion for Pakistan,” says another former Reap chairman.

“Farmers growing Basmati rice are happy too. They are getting Rs250,000 per acre in revenue which is the highest return for the crop in the last decade,” he adds. “We will have a huge bumper crop next year. In part because the farmers will be encouraged from higher prices this year and partly because the floods have increased soil fertility for rice.”

Indian factor

India’s share in the global rice trade is over 40pc. With below-average monsoon rainfall and deepening concerns over flood inflation, India imposed a 20pc duty on exports of various grade of rice early this month.

“We expect long-grain rice prices to increase by $50-60 per tonne,” says the exporter solemnly but with an undernote of glee. “Thailand, Vietnam and Pakistan together cannot compensate for India’s share so the prices will rise.”

Overall, rice has not been doing well globally. Europe has been impacted by dry weather and the US’s quantum of growth has decreased owing to a higher cost of fertilizer, urea and fuel. There are reports of a very serious drought in China but those numbers are accounted for with caution, explains the ex-chairman.

Together, the limited global supply of rice and Pakistan’s bumper crops indicate a very rosy outlook for rice exporters in Pakistan. Last year, rice was grown over 9.5m acres. This year some of the acreage was lost to cotton and corn. But next year, insiders predict acreage to be back up to 9.5m acres but with a higher yield leading to record numbers.

Vested interests

So why are the numbers so blown up? According to data provided at a briefing at the Chief Minister House in Sindh earlier this month, nearly 75pc of the crop in the province has been destroyed.

The government wants the donations and the aid flowing in, says the former Reap chairman. It is in the interest of local farmers and traders that rice is traded at a higher price if there is panic in the market about a shortage.

Together, the implicit or explicit collusion has inflated the numbers.

India’s story is narrated with sympathy for the rival country’s exporters. “Even the vessels at ports have been impacted,” says the ex-chairman with sorrow for his brethren across the border. There is palpable unease at the thought of government intervention.

“A single tonne of Basmati rice exports can purchase three tonnes of wheat,” he says, the message being clear — don’t let food security fears prevent exports. Rice is not a staple in Pakistan, wheat is. Let us export rice and earn the dollars necessary for the purchase of wheat, he pleads.

Published in Dawn, The Business and Finance Weekly, September 19th, 2022

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