Basmati prices rise due to US-Iran prisoner deal, Pakistan MEP

Basmati rice prices are expected to rise as the United States releases $6 billion of Iranian oil money held by South Korea over the past five years and Pakistan plans to raise its minimum export prices. This development will help increase the prices of fragrant rice. They will also help the government fend off a campaign by a section of shippers against the Centre’s August 26 decision to set a minimum export price (MEP) of US$1,200 for shipments of long-grain rice. 

 Rupee Rial Account 

 Seoul withheld the money from oil supplied to Iran in 2018 when the United States imposed sanctions on Iranian oil in 2019 over Tehran’s nuclear program. Washington is expected to release five Iranian prisoners, but two of them remain in the United States. The use of the money is limited to humanitarian goods such as food and medicine. “India’s basmati and tea along with medicines are clearly benefiting from the US-Iran prisoner exchange. Exports of these goods have been affected following the sanctions”, said a trade analyst. 

  Humanitarian needs 

  Iran bought 1.48 million tonnes (mt) and 1.31 million tonnes of basmati rice from India in 2018-19 and 2019-20, respectively, before its purchases fell to 0.74 million tonnes in 2020- 21. Over the past two fiscal years, Tehran has bought nearly a million tons. 

 In the first quarter of the current fiscal, Iran bought 2.25 lakh tonnes of fragrant rice. April-July basmati exports were 1.61 million tonnes worth $1.77 billion, compared with 1.51 million tonnes worth $1.57 billion a year ago, data from the Food and Agriculture Organization showed. 

Agriculture and Processed Food Exports. 

“Since Iran can buy humanitarian aid with only $6 billion, it wants to have basmati rice from India. This will lead to demand and in turn, increase its price,” the trader said. 

A helping hand from REAP 

 In a related development that could raise Basmati prices, the Rice Exporters Association of Pakistan (REAP) has set a GDP of $1,103 per tonne for  Super Basmati rice grown in the 2022 season. REAP President Chela Ram Kewlani told the media in Karachi that the GDP is being fixed after a  gap of one year and is now being fixed as per the past practice to ensure fair export of rice. “The prices of Indian basmati rice should be higher than Pakistani varieties. In this way, the REAP correction GDP will help India in a big way”, said the analyst. 

 India’s basmati and tea supplies were hit when Iran ran out of money from its rupee account after New Delhi stopped buying crude oil from Tehran. Iran mostly used this account to buy its food needs from India. 

 “Unable to use” 

  REAP’s Kelwani told the media that Pakistan would benefit from restrictions on Indian rice exports, but the businessman said Islamabad “doesn’t have the capacity to capture India’s market share”. “While India faced the problem of tricyclic pesticide residues in 2019-20, Pakistan was able to export only 0.89 million tonnes of basmati at an average price of $904 per tonne,” a trader said.  Pakistani exporters are facing problems in their country’s economic crisis, exacerbated by high-interest rates and shipping problems, an analyst said. Meanwhile,  Malaysia has decided to allow food traders to buy wholesale imported white rice at 160 ringgit (₹2,850) per 50 kg.

 Thailand misses the October deadline 

  According to media reports, Thailand has asked rice farmers to skip the second crop after harvesting the main crop in October. This is because there is not enough water in its reservoirs due to the effect of El Nino.  The second growing season, which is very productive, accounts for 25 percent of Thailand’s total rice production. The US Department of Agriculture has forecast that Thailand’s rice production will fall to 19 million tons in 2023-2024 from 20.91 million tons in 2022-2023.  Global rice prices hit 15-year highs this year after India slowed exports, first banning shipments of white rice and then imposing a 20 percent export tax on pre-milled rice. These measures, in addition to the state assembly responsible for basmati affairs, aim to ensure adequate domestic supply and cool the rise in the prices of the food grain.

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