Basmati rice exports may drop to 3 year low on new EU rule

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Rice companies are expected to focus on the domestic market after a surge in local prices following lower stockpiles and concerns that a drop in the crop area would lead to lower output. Photo: Hemant Mishra/Mint

New Delhi: India’s basmati rice exports may drop to a three-year low this year as the European Union (EU) tightens a fungicide rule and local prices strengthen.

Exports may decline as much as 5% to 3.79 million metric tons in the year that began on 1 April from a year earlier, said Vijay Setia, president of All India Rice Exporters Association. That would be the lowest since 2014-15, according to the association’s data.

“We will try to export polished rice to the European Union to avoid the new fungicide norms,” Setia said in a phone interview. Exporters are possibly not yet fully prepared to meet the new stringent norms, he said.

According to the European Union’s rule, the residue level of Tricyclazole fungicide in basmati rice should not exceed 0.01 parts per million from 1 January 2018, compared with 1 part per million currently, Setia said. About 80% of India’s basmati rice shipments include unpolished grains. The rest is sold after polishing, which significantly lowers fungicide residues.

Rice companies are expected to focus on the domestic market after a surge in local prices following lower stockpiles and concerns that a drop in the crop area would lead to lower output, Setia said. Basmati paddy output may fall 8% from a year earlier to 5.65 million tons in 2017-18, a decline for a third straight year and the lowest since at least 2009, according to the association.

Farmers across the country have reduced planting 7.7% to 1.55 million hectares (3.8 million acres) from a year earlier to grow other agricultural crops, according to the association.

Local prices of some aromatic varieties used in dishes such as biryani and pilaf have surged 50% to around Rs30 per kilogram from a year earlier. The price rally may boost earnings of millers such as KRBL Ltd and LT Foods Ltd, which have already seen their share prices doubling this year.

Basmati rice exports totaled 2.12 million tons in the six month through 30 September, compared with 2.06 million tons a year earlier. Total rice exports climbed to 6.07 million tons from 5.43 million tons, according to the association’s data. Bloomberg

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