Salient Features of the International
Rice Market
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Trade of Residual Supply
- Govt. in most rice growing countries protect
both consumers and farmers from price
variation by maintaining non- price barriers
between domestic and international markets
As a result, international trade in rice has
become a function of excess domestic supply
over demand
The trade is not much responsive to world
prices.
Salient Features of the
International Rice Market
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Thin International Market
- world rice market is thin in relation to
world production
- Less than 5 percent of annual rice
production is traded internationally.
- Bulk of rice production occurs in the
Asian countries which are also major
rice consumers
Salient Features of the
International Rice Market
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High price volatility
- Thinness of the international market
leads to increased price volatility
- It creates added incentives for self
sufficiency in rice, further thinning the
market
Salient Features of the
International Rice Market
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High search and transaction cost
- fluctuation in the participants’ share in
the market
- absence of fixed trade channel leads
to high search and transaction cost
- Each decision to enter the market
generally requires a new search for
trading partner.
Salient Features of the
International Rice Market
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Non-homogenous commodity
- different varieties and grades are
preferred by different consumers
- Many attributes influence the value of
the produce resulting in large price
differentials among different grades
Indicators of global competitiveness
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Basmati rice
Location: karnal, Haryana
Exported from kandla port
NPC = 0.89
EPC = 0.88
ESC = 0.74
DRCR = 0.48
Although basmati rice is sufficiently price
competitive, India has failed to perform
sufficiently well in rice trade
Perspective on rice exports
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Supply constraints
- Need to augment production of basmati rice
- Backward and forward linkages to farmers
Procurement constraints
- Lack of requisite statistics for purchase
planning by the exporters
- High incidence of local taxes/charges
Perspective on rice exports
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Processing constraints
- Excessive investment in rice milling capacity
- milling capacity of 286 million tons of paddy
against production of about 120 million tons.
- low cost of installation and replacement of
rice huller
- low capacity utilization (180-220 days in a
year)
Perspective on rice exports
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Low incidence of modern rice mills
Levy disincentives to exporting rice mills
- most exporters are merely traders instead
of processor-cum-exporter
Exporter pre-qualification is absent
- only registration with APEDA
- most rice traders are fly-by-night operators,
striving to maximize short term gains