Paddy prices staging modest recovery after hitting rock bottom

The domestic paddy prices are staging a modest recovery in the current procurement season after hitting rock bottom levels not long ago coupled with a rugged export market scenario.

At the Indian Commodity Exchange (ICEX), the paddy (1121 variety) prices were trading at Rs 3,260 per quintal (100 kg), up by 3.55 per cent, as the purchase was halted at the Asia’s biggest grain market in Khanna (Punjab) following a spell of rain that lashed the area recently. Paddy 1121 price a month ago was around Rs.3700 which fell to Rs.3088 last weekend.

Many factors are responsible for this slow yet firm recovery in the paddy prices in the coming weeks, including significant crop loss due to flood induced inundation apart from the recent cyclone in some of the key paddy growing areas. In addition, the paddy prices are gaining traction owing to the higher minimum support price (MSP) announced by the Centre for the current season 2019-20.

After witnessing a drastic downfall, the paddy price situation is slowly getting better. This is the perfect time for the stockists and rice mills to stock for the entire coming year, which is fuelling robust procurement and buying by the market players.  

At the same time, rice exporters are optimistic also that the Iran market would be back on track again in the next 2-4 months, which has further improved the price sentiments. Iran accounts for more than one million tonnes of basmati exports annually. The US-Iran tensions had introduced a uncertainty for the mutual barter trade between India and Iran.

The recent cyclone in certain parts of the country had also caused extensive damage to the rabi crops, including paddy in West Bengal and Odisha belts. Some south Indian markets like Telangana also showed a shortfall in paddy arrival this season. 

The extent of the damage to paddy due to flooding in the key Northern states and the recent cyclone in the South-Eastern states has yet not been estimated, but they are significant. The expected short supply in the current season is also pushing up the paddy prices. Besides, unseasonal rains in Maharashtra are expected to have damaged crops on 7 million hectares of land.

Indian exporters rue the lack of long term rice export policy coupled with successive increase in procurement costs under the MSP mechanism, which they claim have made Indian rice exports, especially non-basmati, noncompetitive in the global arena. As such, over the past few years, Pakistan, Thailand and Vietnam have emerged as strong players in the Asian and African regions, thus hampering the prospects of Indian rice exports.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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