The Pakistani rice market is anticipated to experience robust growth in 2024, building on the positive momentum observed in the second half of 2023.
The Pakistani rice market is anticipated to experience robust growth in 2024, building on the positive momentum observed in the second half of 2023. Despite cautious optimism due to potential macroeconomic challenges and the uncertain prospect of India easing its rice export restrictions, various factors contribute to a bullish outlook for Pakistan’s rice sector.
Following a sluggish start in 2023, induced by the aftermath of 2022’s devastating floods and India’s non-Basmati white rice export ban in July, the latter half of the year witnessed a remarkable surge in Pakistan’s rice exports.
The trend is expected to persist into 2024, with the US Department of Agriculture forecasting a 64% year-on-year increase in milled rice production to reach 9 million metric tons in the marketing year 2023-24. This would be the second-largest crop ever, slightly below the record 9.3 million metric tons in the previous marketing year.
Projections suggest that rice exports from Pakistan will set a new record at 5 million metric tons in the same period, surpassing the 4.8 million metric tons achieved in the preceding marketing year.
Key factors influencing this positive trend include a large exportable surplus, competitive pricing, and a shift in demand dynamics. The export ban imposed by India has redirected buyers from Africa and the Far East towards Pakistani rice, creating new opportunities for exporters. The anticipation is that this trend will persist until there is a relaxation in India’s rice export policy.
Despite concerns about the crop output in Southeast Asia due to El Nino, the overall demand for Pakistani rice is expected to remain strong. Trade sources indicate that Iran is likely to become a significant buyer in the first half of 2024.
Chinese demand, while muted in the last quarter of 2023, is seen as an opportunistic factor, with potential imports expected in the fourth quarter of 2024, contingent on global prices.
African destinations are expected to continue leading the export markets for non-Basmati rice, with Pakistan enjoying logistical advantages and offering more competitive Free on Board (FOB) prices compared to Southeast Asian suppliers. However, challenges such as rising freight rates, particularly to West Africa, Europe, and North America, pose potential obstacles.
Ongoing issues in the Red Sea, with shipping firms suspending transits due to attacks by Yemen-based Houthi militants, and the introduction of a surcharge following the EU Emissions Trading System coming into force, may impact exports in the first quarter.
Despite the positive market conditions, downside risks loom. The rally in the Pakistani rice market is largely attributed to the Indian export ban, and any indication of India lifting the ban could lead to a downturn. Exporters and millers, relying on short-term bank credit, face potential challenges if global rice prices drop significantly.
Furthermore, foreign exchange volatility is a concern among market participants, with uncertainty about the direction of the Pakistani rupee. Factors such as the outcome of the IMF’s bailout package and upcoming elections in February could influence the stability of the currency.
On a positive note, the Basmati market is expected to remain stable in 2024, supported by a good 2023 Basmati crop. While demand slowed towards the end of 2023, it is expected to pick up in the first quarter of 2024, with the EU and Middle East continuing to be the primary markets for Pakistani Basmati.
However, Basmati prices may not reach the highs of 2023, and the increase in freight rates to the EU is likely to exert downward pressure on export prices. The higher minimum export prices of Indian Basmati are seen as a potential advantage for Pakistani Basmati exports.
The Pakistani rice market enters 2024 with optimism, driven by favorable production forecasts, increased global demand, and strategic shifts in the international rice trade landscape. However, stakeholders remain watchful of potential challenges and external factors that could impact the industry’s trajectory.