September was above normal in most parts of drought affected eastern
India. This benefitted the standing rice crop. However, the rains
arrived too late to support additional rice planting. By the end of
September, progressive rice planting was six million hectares behind the
previous year's level. Assuming an average national yield level of
around two tons per hectare, this would translate into a production loss
of at least 12 million tons. The poor rainfall also coincided with the
critical grain filling stage for the rice crop in eastern and central
India. Heavy rains in early October caused a serious flooding problem in
the major rice growing southern states of Andhra Pradesh and Karnataka,
damaging the standing rice crop and further tempering kharif production
prospects.
On September 24th and 25th, state agricultural officials met with the
Government of India's (GOI) Agriculture Ministry in Delhi to discuss
crop plans for the rabi (winter season); however they were unable to
release a preliminary production estimate of the kharif (fall and early
winter harvested) crops, including rice. The GOI is expected to release
its preliminary production forecast of various kharif crops by October
15. The GOI is urging state governments to increase rabi/summer rice
area coverage by 1.2 to 1.5 million hectares and production by 3.5 to
4.0 million tons above the MY 2008/09 levels to partly offset the
production decline in the kharif season. For further details visit:
www.pib.nic.in/release/release.asp?relid=52838. However given the agro
climatic constraints, limited irrigation availability and poor soil
moisture conditions, it will very difficult to reach such an ambitious
area and production target. According to government reports, water level
in 81 major irrigation dams was only 57 percent of the full storage
capacity compared with 82 percent a year ago. Post continues to forecast
a 15 to 17 million ton decline in MY 2009/10 rice production from the
2008/09 record production of 99.2 million tons.
With lower production, government rice procurement under price support
is also likely to decline from the record level of 33.2 million tons in
MY 2008/09. Most of the decline is likely to be confined to Uttar
Pradesh and Bihar; however, procurement in the major surplus state of
Punjab is expected to remain around the MY 2008/09 level of 8.6 million
tons, as the mostly irrigated rice crop in Punjab was not affected by
poor monsoon rains. Even if the GOI manages to procure a major share of
domestic production offering a higher support price, domestic rice
prices are likely to remain firm due to reduced open market availability
and higher support price (Rs. 9,500 ($198) per ton for Common varieties
and Rs. 9,800 ($204) per ton for Grade A varieties of un-milled rice).
Thanks to record procurement in MY 2008/09, government-held rice stocks
were 17.2 million tons on September 1, 2009, compared with 8.5 million
tons a year earlier. Stocks on October 1, 2009, are projected to be
around 15 million tons, the highest level since 2002, and well above the
government's desired October 1 buffer stock level of 5.2 million tons.
However, privately held stocks, for which no reliable estimates are
available, are expected to be much lower than in previous years as the
higher support price has ensured that the greatest share of surplus is
purchased by the GOI. Although the GOI is supplying adequate quantities
of rice and wheat to various state governments for distribution through
the public distribution system at subsidized prices, several states are
unable to make use of the allocated quantities due to financial and
administrative constraints. Thus, the country is facing the paradox of
large government grain stocks and high food prices. With a significant
shortfall in rice production, grain prices in general, and rice prices
in particular are likely to firm up in coming months.
Although there has been some discussion about the Government considering
abolishing the import duty on rice, there has not been any official
notification. But even if the import duty is removed, large scale
imports are unlikely as long as global rice prices remain firm. Due to
concerns over high domestic rice prices, the GOI is unlikely to permit
exports of non-basmati rice in the near future. However, exports of the
premium aromatic basmati rice will benefit following the GOI decision to
lower the minimum export price to $900 per ton from the earlier $1,100
per ton. The official notification is available at:
http://164.100.9.245/exim/2000/not/not09/not0509.htm. The recently
revised Iranian rice import duty, from 21 percent to 41 percent, will
have a negative impact on India's exports of PUSA 1121 variety basmati
rice. Over recent months, Iran has been a major market for this variety
of rice.
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