The credit profile of rice exporters is likely to improve over the near-to-medium term due to increase in market share following production shortfall in parts of South Asia, India Ratings and Research (Ind-Ra) said in a report. Credit profile of rice exporters to improve over the near-to-medium term on the back of increased market share, higher realisations and improved liquidity. Significant production shortfall in parts of South Asia is likely to result in a substantial gain in market share by various Indian exporters, Ind-Ra said. Ind-Ra expects Indian rice exports to account over 29 per cent of the global rice trade in marketing year (MY) 2017-18 compared to 26.70 per cent in the MY 2016-17.
The rating agency said subdued yields across major South and East Asian rice producers should result in higher realisations and marginal improvement in export volumes. Weak output levels in Vietnam and other parts of South Asia have resulted in a sharp spike in international prices, primarily on the back of increased demand from exporters to deliver forward export orders, it added. The agency expects demand to remain strong on the back of higher paddy procurement target and minimum support price. In June 2017, the government had decided to increase the minimum selling price of common grade paddy by 5.4 per cent to Rs 1,550 per quintal, it said.
The procurement target was also increased to 37.50 million tonnes in MY 2016-17 from 34.34 million tonnes in the previous year, it added. Indian Basmati exports grew 35 per cent annually to Rs 136 billion in the first half of FY18 on the back of a significant growth in offtake by Iran. While the timely lifting of the temporary import ban by the Iranian government on November 22, 2017 is expected to augur well for Indian rice exporters, yet, significant volume gain is unlikely due weak demand from countries like Saudi Arabia and Kuwait, it said. Iran is likely to replace Saudi Arabia as the largest exporter of Indian Basmati rice.
Saudi Arabia reported a 13 per cent decline in rice imports in the first quarter of FY18. Despite the recovery in demand from Iran and the US, Ind-Ra expects total growth in Basmati export volumes to remain range bound between 3 per cent and 5 per cent.
Source: Financial Express