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One of the most integral parts of India’s agricultural exports, the global Basmati rice market often experiences price fluctuations.
Since Basmati rice is cultivated in only India and Pakistan in the world, with the former producing the giant’s share of the total cultivation, price volatility leads to considerable implications on the worldwide B2B and retail rice markets.
For Indian rice exporters, this directly translates into increased difficulties in completing trade and profitability, also impacting the Indian economy and widening trade deficits.
Similarly, crashing prices offer its fair share of difficulties. While in layman’s terms, low prices offer the optimal conditions to export and purchase Basmati rice, it creates challenges like profitability and scalability — leading Indian export houses to actively deal with increasing losses.
The long-term impact of reduced prices conducts a chain reaction, directly impacting grassroots stakeholders, who fail to receive optimal prices for their produce.
With Indian Basmati rice gaining a considerable market share around the world, price volatility leads to increased challenges from competition, requiring strategic interventions to ensure pricing, quality and streamlined supply chain activities.
To understand the volatility of Basmati prices, it is advisable to understand that the market prices often depend on several factors, many of which cannot be controlled.
For example, international conflicts directly after shipping and container prices, an aspect that increases the price of all commodities including Basmati rice. However, since Basmati acts as a staple food in several geographies, Indian traders remain unable to increase prices to balance profitability.
Furthermore, when Indian basmati prices are high, international buyers flock towards competitors from neighbouring countries, leaving Indian export houses with considerably reduced order bookings.
In recent years, Indian basmati exporters have witnessed a considerable hike in Basmati rice more than once, leaving them stranded to fill their order books, impacting profitability and scalability aspects directly.
While fractional high and low prices may offer benefits to Indian exporters and grassroots stakeholders, price crashes lead to significant losses for traders.
If prices dip near or lower than sourcing prices, Indian exporters come at risk for increased losses, opening them up for long-term impacts on the seasonal prices.
Coupled with additional prices associated with Basmati rice such as processing, shipping and logistics, the crashing of Basmati prices in international markets opens traders up for significant losses — an aspect that leads to supply chain disruptions and affects food security in international markets.
While price volatility remains unavoidable in trade, prolonged volatility in Basmati prices in the international markets leads to a long-term impact on the entire ecosystem.
To begin with, low prices in the international markets directly translate to lowered mandi prices in India, where Basmati rice is sourced. At the mandi level, low prices directly affect sellers and other stakeholders, leaving them unable to receive appropriate prices and at a loss.
For traders exporting Basmati to international markets, processing the Basmati requires additional costs and if prices are too high or low, leading to trade difficulties.
This is why exporters look for ideal conditions regarding Basmati prices in the export season. Balanced prices that are neither too high nor too low lead to optimal export conditions, enabling fair trade for both buyers and sellers, while also helping the Indian economy and narrowing trade deficits with strategic countries.
Coupled with this, balanced prices also help Indian basmati exporters gain an edge over competitors from other countries, uniquely positioning them at the top of the Basmati trade ecosystem and opening up numerous possibilities regarding profitability and scalability.
For example, Indian Basmati traders exported 5.24 million tonnes of the product in FY 23-24, as compared to 4.56 million tonnes in the previous fiscal year. Similar low volatility of Basmati price in the following year also extended support for Indian exporters in the key international markets, especially in Europe and the Middle East, enabling them to offer competitive prices for bulk orders.
As India looks towards establishing itself as the go-to destination for basmati rice by acquiring a GI tag in the future, stabilising market prices will be a key step for sustained profitability in key international geographies.
Indian basmati exporters have performed admirably in the last few years with their time-appropriate strategic interventions to export record figures, however, sustaining the same momentum will be crucial for the comprehensive growth of the sector and stakeholders.
As Basmati rice acts as a staple food for many countries in the world, ensuring food security will be another aspect that can be addressed by balanced market prices — a critical enabler of the holistic development of the sector, also extending crucial support to the Indian economy and narrowing trade deficits.
The author is Director and CEO of Aroma AAT Basmati Rice
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