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Salient Features of the International Rice Market

Salient Features of the International Rice Market. 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

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Salient Features of the International Rice Market

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  1. Salient Features of the International Rice Market • 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.

  2. Salient Features of the International Rice Market • 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

  3. Salient Features of the International Rice Market • 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

  4. Salient Features of the International Rice Market • 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.

  5. Salient Features of the International Rice Market • 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

  6. Indicators of global competitiveness • 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

  7. Perspective on rice exports • 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

  8. Perspective on rice exports • 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)

  9. Perspective on rice exports • 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

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