Basmati paddy prices recover on ease in US-Iran tensions

Chandigarh: The spot price of basmati paddy recovered by more than 2 per cent last week after tumbling over concern that escalation of tension between Iran and the US would hit exports of the premium variety rice to the western Asian nation, India’s largest buyer.

The price of basmati increased to Rs 3,229 per quintal on Friday from Rs 3,157 in the earlier week, as per data from the Indian Commodity Exchange (ICEX) spot price index. Prices had mellowed since the last week of October when they stood over Rs 3,400 per quintal.

The partial recovery is supported by an increase in international price and lower rice production forecast by United States Department of Agriculture in its last report, say analysts.

In the second week of January, The price of the aromatic rice had fallen 6-8 per cent in sport markets on stock build-up after exporters started holding back shipments to Iran fearing escalating US-Iran tensions would further delay payments.

The spot market prices of par boiled basmati, widely exported to Gulf nations, had fallen to Rs 51 per kg from Rs 54-55 after exports were halted in response to escalation of tension. “Prices have come down as Indian exporters are jittery over exporting to Iran due to prevailing uncertainty over payments,” Vijay Sethia, former president of All India Rice Exporters’ Association (AIREA), told ET. “The price has come down as exports to the largest buyer of Indian basmati have come to a halt.”

Ajay Kedia, director Kedia Advisory, said prices also got support as India had witnessed abnormal rainfall during Kharif season 2019-20 and, consequently, rice production was expected at 90 million tonnes, 12 per cent down from last year’s production estimate of 102 million tonnes. Besides this, flooding due to consistent rains during November 2019 had affected the Kharif cropped areas, including paddy, in 15 states, including the major rice-producing states of Maharashtra, Karnataka, Punjab, Madhya Pradesh and Uttar Pradesh, he said.

“Also, prices should get support this season from higher procurement by the government–seen with increased MSP of paddy, which is at Rs 1,815 as against Rs 1,750 per quintal,” Kedia said.

Kedia said international market prices were quoted near to $ 425-$ 428, an increase from $ 395-$ 420 the week before, after the USDA in its last report had estimated the global availability of rice to be 67.10 million tonnes in the 2019-20 marketing season, which has increased by 600,000 tonnes from the December report.

“Basmati prices are likely to remain range-bound at Rs 3,350-3,380 per quintal till the global scenario brightens. It could go 20 points up or down, but not much price movement is expected by next month,” said a Karnal-based analyst.

The price had crashed to Rs 3,157 per quintal on Friday last week following an advisory by the AIREA to restrict shipment to Iran till the situation in the region eases.