India Exports Non-Basmati Rice To China After Three Decades: Here’s What Exporters Say On Its Long-Term Prospects

India’s agricultural exports, particularly rice shipments, have been a revelation this year, when the country has been going through tough times due to the novel coronavirus (Covid-19) pandemic.

India’s rice exports have performed exceedingly well this year on both basmati and non-basmati fronts, with total shipments rising nearly 25 per cent during April-November period of the current fiscal, compared with the same period a year ago.

On the non-basmati rice front, exports topped last year's full exports in the first six months of the current fiscal.

A feature of non-basmati rice exports, in which India is the number one global exporter for the last couple years, is China purchasing the food-grain after a gap of over three decades.

In addition, Bangladesh is likely to buy at least three lakh tonnes of non-basmati parboiled rice from India.

Of this, it has already floated tenders for one lakh tonnes — in two batches of 50,000 tonnes each — and two Indian firms have got the global tenders at $405 and $416 a tonne respectively.

Two more tenders are likely to be finalised by the end of this month.

“Every time Bangladesh has bought such quantities from India, exports have recorded new highs,” says Rice Exporters Association (REA) President B V Krishna Rao.

The US Department of Agriculture's World Agricultural Supply and Demand Estimate (WASDE) report said India’s rice exports have remained robust since August this year and it could export 13.50 million tonnes in the season ending June next year.

This will be record shipments by India on the back of purchases by China and Bangladesh. The question, thus, among the exporting community is will China, which has the potential to buy a good quantity every year, continue to import from India?

The jury is out on this, going by different views.

“China can be a long-term bet for India and it can import at least five lakh tonnes annually. It has so far bought one lakh tonnes with some of the cargoes on way to Chinese ports,” says REA’s Rao.

“China is an unpredictable trading partner, which does not encourage Indian imports. The one lakh tonnes it has bought are 100 per cent broken, which could have been imported for byproducts,” said former All India Rice Exporters Association (AIREA) president Vijay Setia.

Exporters agree that China has bought 100 per cent broken par-boiled rice as it costs lower than other grades such as five or 10 per cent broken. The Indian rice imported by China could be used for making porridge or starch or feed pets and animals.

The 100 per cent broken non-basmati rice has been bought at a price ranging between $300 and $320 a tonne, which is at least $50 a tonne lower than the price of 10 per cent broken rice that India has offered in the global market.

A multinational firm export official, who did not wish to be identified, said that China has been forced to buy Indian rice since it has been having problems with its agricultural sector in the last five years.

“Agricultural production in China has been hit by either drought or floods over the last four to five years,” the official said.

Otherwise, China would not have bought from India. “Unless it would have fallen short, it would not have looked at the Indian option. Chinese need rice of a different taste and texture. That’s why it looks at Vietnam, Pakistan and Myanmar,” the official said, virtually ruling out a repeat of China importing rice next year.

One of the reasons for China turning to India was that rice production this year has been affected in Thailand and Vietnam due to drought. “Both the countries had less surplus, while we had a good surplus,” AIREA’s Setia said.

India’s non-basmati exports have also been aided by huge stocks and projections of a record kharif paddy production this year.

In April, when demand for rice exports picked up, FCI had 32.24 million tonnes in its warehouses, besides unmilled paddy of 25.24 million tonnes, which could yield 16.91 million tonnes of rice.

By 1 October, rice stocks with FCI was down to 22.19 million tonnes, while it had 10.94 million tonnes of paddy stocks that could yield 7.3 million tonnes of rice.

However, the Food Corporation has procured 41.10 million tonnes of paddy from farmers across the country since 1 October, which when milled can yield 27.51 million tonnes of rice.

The Ministry of Agriculture in its first advance estimate of food-grain production for 2020-21 has estimated kharif rice production at 102.36 million tonnes against 101.98 million tonnes last year.

Non-basmati rice exports more than doubled during April-September in the current fiscal to 50.79 lakh tonnes against 24.96 lakh tonnes in the same period a year ago, as per Agricultural and Processed Food Exports Development Authority data.

In its monthly merchandise trade data details this month, the Commerce Ministry said rice exports during the April-November period of the current fiscal had increased by about 25 per cent compared with the same period a year ago.

Stating that 17 Indian firms have been cleared for rice imports from India, AIREA’s Setia said that China could be more interested to encourage other countries and probably export the rice it buys from India to Africa.

A trade expert based in Malaysia said that China might not be in the Indian rice market for a longer haul. “It is buying from India in view of the border tension between Indian and Chinese Armies at Ladakh. It wants to show that it is friendly towards India,” the expert said, on condition of anonymity.

Indian and Chinese troops were involved in violent incidents at the Galwan Valley in Ladakh in which both armies lost their personnel. India said it had lost 20 of its soldiers, while China has chosen to keep quiet on its losses.

“Probably, China might buy for one more year until Vietnam and Thailand return to parity. It is not the first time that India’s 100 per cent broken rice prices are competitive,” the expert said.

According to him, even before India has been the most competitive nation in offering 100 per cent broken rice but China has ignored it. “Senegal buys six to seven lakh tonnes of 100 per cent broken rice from India,” he said, adding that China had cleared the Indian companies for imports at least three years ago.

REA’s Rao said that India had offered its rice at a price that was at least 30-40 per cent competitive compared to Thailand and Vietnam.

Last week, India’s 5 per cent broken parboiled rice was quoted at a two-month high of $380-385, up on strong demand and shipping woes besides a strong rupee.

In comparison, Vietnam’s 5 per cent broken rice topped $500 a tonne, a nine-year high, while Thailand’s same grade rice was quoted even higher at $500-519 a tonne.

“We will get to know about Chinese plans once all cargoes reach their ports. Chinese COSCO group, which is like our FCI, has not bought any rice yet,” said REA’s Rao.

China is expected to announce its new rice import quota later this month, well ahead of the Chinese new year. “It should probably give us a clear picture on the Chinese intentions,” Rao said, adding that there was no quota for 100 per cent brokens.

Currently, there are problems with logistics and container availability. Besides, there is scope for default by the Chinese.

However, Rao is optimistic about China continuing to buy more in the long term.