Indian basmati exports lose price advantage as Pak removes MEP

Nidhi Sharma MUMBAI

BASMATI exporters from India are in a spot despite a sharp fall in the value of rupee versus the US dollar. Although a weaker rupee is good news for them, the removal of the minimum export price (MEP) by the Pakistan government have given basmati exporters from that country an edge over their Indian counterparts.
    MEP for Indian basmati is currently $1,200 per tonne, while Pakistan is offering a much lower rate of $700-900 a tonne for its equivalent variety. As a result, several importing countries like Iran and Saudi Arabia have lowered the price they are willing to pay for Indian basmati to $1050 a tonne.
    To stem rising inflation caused by high commodity prices, the Indian government had recently announced several measures, including certain curbs on rice exports. It banned non-basmati rice exports and fixed the MEP at $1,200 per tonne for basmati rice, inclusive of the export tax of $200 per tonne. Ironically, when the rupee was strong, Indian exporters still managed good earnings as they were getting a price of over $2,000 a tonne with the commodity trading at alltime highs to cater to increased demand.
"With basmati rice from Pakistan quoting nearly $400 lower than the Indian variety, leading importers are preferring to buy from Pakistan," said All-India Rice Exporters Association president Vijay Sethia. He added that government should either remove MEP or lower it to facilitate exports.
    Globally the price of rice has crashed significantly from all-time highs earlier this year, said Mr Sethia. Currently, Thailand is quoting $500 for its Jasmine variety, down from $1,000, and Indian basmati is down around 50% at $1050.
    In 2007-08 crop year ending September, India produced over 96 million tonne of rice. It exported close to 1.2 million tonne of basmati and 3.2 million tonne of non-basmati rice, according to estimates by the Agricultural & Processed Food Export Development Authority (APEDA). India is the largest exporter of basmati rice and its domestic production is close to 3% of the total rice production.
    This year, India is likely to produce nearly 100 million tonne of rice because of the increased acreage. This has reduced the price of paddy by 20-30% in the local markets from last year. Exporters have urged the government to allow exports of non-basmati rice by setting a minimum export price, said Pawan Agarwal, a rice exporter.
    nidhi.sharma1@timesgroup.com 

Recession fears drag crude oil to 13-month low

Oil dropped nearly $3 on Wednesday, touching 13-month lows on expectations that the deepening economic slowdown will cut into already weakening demand. Investors scurried to safe-havens and global stock prices fell sharply as concerns over a potential global recession wiped away optimism seen earlier this week over governments' steps to avert a financial meltdown.
    US crude fell $2.87 a barrel to $75.76 in afternoon trades, after hitting $74.62, the lowest since September 2007 and down nearly 50 percent since hitting a record over $147 in July. London Brent crude traded down $3.20 to $71.33 a barrel.
    European leaders pressed for an overhaul of global financial structures, building on trillion-dollar bank bailouts announced this week. US retailers suffered their biggest monthly drop in sales in more than three years in September, adding to concerns of a potential recession in the world's top consumer.
    Slumping demand in the United States and other developed economies, as well as a flight of investors out of oil and into safer havens, has sent oil tumbling from July's record. "The fall in crude futures prices today reflects movement in the stock market, which mirrors fears about a recession that will cut into demand for crude oil," said Joe Possillico, broker for MF Global in New York City. Analysts have scaled back global demand growth estimates, with the Organization of the Petroleum Exporting Countries cutting its forecasts for world demand for crude next year in its latest monthly report.
    "Even if governments are successful in calming equity markets and unfreezing credit markets in the near future, the fallout on the real economy from financial market headwinds is expected to be considerable," the producer group said.
    Opec is due to hold an emergency meeting in Vienna next month to review the impact of the global financial crisis on the oil market. JP Morgan cut its forecast for average oil prices next year to $74.75 a barrel, citing the weak economic outlook.
    "The oil market is caught in the wake of four tsunamis," the US bank said. Traders will scrutinise weekly US inventory data on Thursday for indications on US oil demand. Analysts in a Reuters poll expect increases in crude and oil product products. The data was forecast to show a 1.9 million barrel build in crude stocks, a 600,000 barrel build in distillates and a 2.9 million barrel rise in gasoline inventories last week.
Investors take sell positions with crude seen declining further
MUMBAI: Even as high volatility in equity markets is making investors more riskaverse, commodity investors have spotted a good opportunity in the falling crude oil price. On MCX, commodity traders are taking sell positions in crude oil as the near to mid-term view is that prices could fall further, reports Deepa Krishnan. On Wednesday, crude prices for the MCX November contract declined nearly 5% to Rs 3,740 per barrel. The October contract, which expires on Wednesday, closed more than 5% lower at Rs 3,682. In the international markets, crude oil traded at $76 a barrel levels in early trading sessions in New York, a new low for 2008. "Indians are momentum players, there seems more downside left for crude, prompting the selling," said T Gnanasekhar of Commtrendz Research. The general economic sentiments in the US and fears about whether the US government's plan to inject $250 billion into their banking system would prop up the demand caused oil prices to fall further, analysts pointed out. In the crude oil market, the focus has moved from supply to demand concerns. The global economic slowdown is expected to reduce demand by nearly 15-18%, said Subodh Gupta of Anand Rathi Commodities. Mr Gupta said even if the OPEC meeting scheduled for November 18 hints at cutting supplies, fundamentals indicate higher supplies. And to add to the bleak demand forecasts, OPEC has lowered demand growth for 2009 by 100,000 barrels a day, keeping the projected global growth at 800,000 barrels a day in its monthly report on Wednesday. Some analysts said production cuts by refiners due to falling margins could lead to supply shortage, although the effect of such a move on the prices will be marginal.