2.6m Tons of Rice Output Will Meet 85% of Demand

EghtesadOnline: Atotal of 2.6 million tons of rice have been produced on more than 800,000 hectares of paddy fields across the country this year, showing a 10.34% decline compared with last year’s output, according to the Agriculture Ministry’s director general of Grains and Essential Goods Affairs Department.

News ID: ۷۵۱۶۹۸

13 December 2020

“Last year, due to high precipitation levels and favorable weather, more than 835,000 hectares went under rice cultivation, yielding close to 2.9 million tons of the grain,” Faramak Aziz-Karimi was also quoted as saying by IRNA.

He added that 4 million tons of rice bran were produced this year.

According to the official, annual domestic demand for rice currently stands at 3 million tons and this year 85% of this demand have been met by local farmers.

The difference between domestic production and demand is imported from Pakistan, Thailand, India, the UAE, Turkey and Iraq.

The official noted that 73% of rice cultivation took place in the three northern provinces of Gilan (32%), Mazandaran (26%) and Golestan (15%), and 18% in the southern province of Khuzestan, adding that the staple grain was cultivated in 15 other provinces.

Based on the latest figures released by the Agronomical Affairs Department of the Agriculture Ministry, land under rice cultivation in Gilan, Mazandaran, Khuzestan and Golestan provinces stands at around 220,000 hectares, 214,000 hectares, 180,000 hectares and 100,000 hectares respectively. There are 90,000 hectares of paddy fields in the aforementioned 15 provinces.

Aziz-Karimi said rice production costs have increased by 40% this year which, together with import problems, contributed to the rise in the grain’s domestic prices.

“Saplings were mechanically planted on around 326 hectares and 690,000 were harvested mechanically, showing a 12% and 10% rise compared with last year,” he said.

Decline in Imports

Rice imports over the first five months of the current Iranian year (March 20-Aug. 21) declined by around 48%, according to the secretary of Iran’s Rice Importers Union, Masih Keshavarz.

The official blames the decline in the import of this staple food on the policies of the Central Bank of Iran, adding that CBI insists on allocating forex at the secondary forex market rates to rice imports but fails to deliver, the news portal of Iran Chamber of Commerce, Industries, Mines and Agriculture said.

Known by its Persian acronym, Nima, the secondary market is a trade platform where exporters sell their forex earnings (at rates lower than market prices) and importer buy it for import needs.

Since March 20, the government has discontinued the allocation of foreign currency at the subsidized rate of 42,000 rials per dollar to rice import. It has instead called on importers to meet their forex requirements from the export earnings of non-oil products (petrochemicals, steels and minerals) traded through the secondary FX market that has exchange rates much closer to the free market rates.

“There are currently a total of 200,000 tons of rice in Iran's customs warehouses waiting to undergo clearance procedures once the required foreign exchange is allocated to the consignments. With CBI delays in providing forex to importers, we are currently facing shortage and price fluctuations in the domestic market,” Keshavarz said in October.

CBI does not allow importers to use their own foreign currency, in or outside the country, to import goods, due to transparency issues.

The official noted that since lower income deciles of Iranian population consume foreign rice (with lower quality compared to premium Iranian rice), the government should think of ways to ease the imports of the product.

As per a June decision made by the Market Regulation Headquarters, customs duties on rice imports have decreased from 25% to 10%, Fars News Agency reported.

The decline in rice import duty aims to prevent a surge in prices.

Indian Exporters Anxious About Iranian Orders From Pakistan

Iran has started placing orders with Pakistan for basmati rice, raising concerns of Indian rice exporters who have stalled exports to the Persian Gulf nation due to non-payment of their dues worth Rs1,700 crore. However, exporters see this merely as a temporary blip, The Economic Times reported in September.

“Yes, we have heard that Iran has placed some order with Pakistan recently. It is nothing unusual. However, Pakistan exports 6 lakh tons of basmati rice in the world markets whereas India’s exports stands at 4.4-4.5 million tons,” said Vinod Kaul, executive director of All India Rice Exporters Association.

Kaul said it is a temporary phenomenon and once Iran clears its dues, India will again start exporting to the nation. Iran accounts for 34% of India’s basmati exports to the overseas markets. He said exporters are anxious about when they get their money back.

“They are extremely worried. Also, if Pakistan gradually increases its presence in Iran, then may be in the long term, it may create some problems for Indian exporters,” he said.

A Crisil study has stated that Iran, which imports around 1.3 million tons of basmati rice annually, is expected to register 20% lower volume from India as payment-related issues continue from the last fiscal year because of US sanctions.

India and Iran have been discussing the barter trading system for nearly a year now, ever since the US administration began imposing tough economic sanctions on Tehran. Iran has said it will buy basmati rice, sugar and medicines from India in lieu of fertilizers. A final decision is yet to be taken.

Exports with Iran need to be resumed soon as basmati production is expected to be higher this year. In the last crop season, India produced 7.5 million tons of basmati rice.

“This year, the acreage has increased and we are expecting 8 million tons of rice,” said AIREA’s Kaul.

Gurnam Arora, joint managing director of Kohinoor Foods, said Pakistan has been sending basmati rice to Iran through some convoluted business route.

“The payment was being made in cash. But with India, Iran has a transparent business model. The buyers may have placed some order with Pakistan to meet temporary demand. This will no way impact Indian exports going ahead,” he said.

Arora noted that Iran’s own crop will start coming by October and then the country will not require imported basmati.

“Indian basmati is superior than basmati from our neighboring nation,” he added.