India's rice exports set to ease as govt raises buying price

KRBL

10/07/2018 08:55

* India hikes guaranteed prices paid for rice by 13 pct
    * Wants to woo farmers ahead of general election next year
    * That means Indian rice exports likely to become more
expensive
    * Thailand, Vietnam seen gaining market share 

    By Rajendra Jadhav
    MUMBAI, July 10 (Reuters) - India's rice exports are set to
ease from October as the world's biggest shipper of the grain
boosts guaranteed prices that farmers receive for much of their
crop, making new season cargoes expensive compared to supply
from rival growers. 
    Lower exports would mean that India loses market share in
key Asian and African markets, traders and industry sources
said, with exports from countries such as Thailand, Vietnam and
Myanmar likely to fill any gaps.
    India on Wednesday raised prices paid to local farmers for
common grade paddy rice by 13 percent from a year ago to 1,750
rupees ($25.50) per 100 kg, with Prime Minister Narendra Modi
looking to woo millions of rural poor ahead of a general
election next year.  urn:newsml:reuters.com:*:nL4N1U032N
    The government typically buys more than a third of the
country's rice output at a fixed price, which also has a direct
impact on prices paid by traders.
    "With this price rise, our exports will become expensive,"
said B V Krishna Rao, president of the Rice Exporters
Association (REA).
    "The customer base that we have created over a period of
time is going to shift to Thailand and Vietnam."
    Exporters were this week offering Indian 5 percent broken
parboiled rice  RI-INBKN5-P1  at $388-$392 per tonne on a free
on board (FOB) basis, nearly the same as prices quoted by Thai
exporters.
    But the hike in guaranteed price will force Indian exporters
to offer the new season crop at around $430 from October, making
exports uncompetitive, a dealer said. He declined to be
identified as he was not authorised to speak with media.
    India's rice exports in the 2017/18 fiscal year that ended
on March 31 surged 18 percent from the year before to a record
12.7 million tonnes on strong demand from Bangladesh and Sri
Lanka.  urn:newsml:reuters.com:*:nL3N1S44Q4
    But that demand has already been hit hard, said Nitin Gupta,
business head of rice at Olam India, with Bangladesh imposing a
28 percent tax on rice imports in June to support local farmers.
 urn:newsml:reuters.com:*:nL3N1T93MF
    And Indian states like Chhattisgarh could announce
additional payments to farmers on top of the prices fixed by the
central government, industry officials said.
    "Chhattisgarh could announce a bonus of around 200 to 300
rupees (per 100kg). This will further widen the gap between
local and international prices," said a Mumbai-based dealer with
a global trading firm.
    India uses rice and wheat that it buys from local farmers at
a fixed price to supply subsidised food to the poor and meet any
emergency needs.
    However, Rao of REA said that the government could
eventually be forced to incentivise more overseas rice sales as
its storage gets closer to capacity.

 (Reporting by Rajendra Jadhav
Editing by Joseph Radford)
 ((rajendra.jadhav@thomsonreuters.com; +91-22-6180-7153 ;
Reuters Messaging:
rajendra.jadhav.thomsonreuters.com@reuters.net))