Basmati paddy futures price has tumbled nearly 6% in a week on the Indian Commodity Exchange (ICEX). Analysts attribute it to softened festival demand, improved supplies and the impact of crude slump. On ICEX, the May contract traded at around Rs 3,309 per quintal on Friday, falling from the high-perch of Rs 3,498 on April 17- contract. About 66% of India’s 6.5 million tonne of basmati rice is exported. Phenomenal lows in crude oil price are likely to give a shakedown to the economies of West Asian countries, which are the staple buyers of basmati rice, according to experts. “Saudi Arabia,facing its worst economic shock since 1999, is heading for a fiscal deficit of 15%. The Gulf country is considering a massive borrowing plan to bail out its economy, sinking from the double-shock of pandemic and crude oil slump,” said Ajay Kedia,director, Kedia Advisory, on the shrinking purchasing power of one of the major buyers. “In such a scenario, I would not be surprised if it de-prioritises imports, including those of some high-end food products like basmati rice,” Kedia told FE. In the domestic market, Ramadan rice demand has softened, as consumers have been stocking up for the holy period starting Friday. Supply had improved after partial resumption of operations in rice mills. This has further rendered the price outlook feeble. Even in spot markets, price of basmati paddy is unlikely to escalate, as the rice exports are expected to be limited, due to several restrictions on export cargo movement as part of Covid-19 curbs, said Anand Goyal, a rice trader.
Pusa 1121 paddy spot price has dropped from Rs 30 per kg to Rs 28 per kg. Traders feel it might hover in the Rs 23-25 per kg price band in coming days. The government’s foodgrain production target is 298 million tonne for 2021. Normal to excess rains, forecast by IMD, is conducive to increase in rice output. This implied glut too doesn’t seem too rosy for basmati rice price.