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No lessons learnt, Indian rice exporters still risk shipping to Benin

In 2015, Indian rice exporters suffered losses when they were forced to sell at a discount as prices crashed in the West African nation.

November 26, 2020 / 06:06 PM IST

Some Indian rice exporters are taking the risk of selling the foodgrain to the West African nation of Benin even though five years ago they were forced to sell at a discount as prices crashed, sources said.

They are exporting to African destinations even as non-basmati rice exports from the country are likely to double this fiscal.

According to sources, at least 10 percent of the more than 60 lakh tonnes of rice that is exported, mostly from the southern Indian port of Kakinada, is headed towards Benin’s capital Cotonou.

Par-boiled rice is being shipped to the Cotonou port and it is here where the risk lies. “Par-boiled rice that go from India to Cotonou is usually smuggled into Nigeria. But Nigeria will suddenly close its borders and it will result in sharp fall in prices. That could result in Indian exporters having to offer sharp discounts for the buyers there to accept the consignments,” said a trader, who did not wish to be identified.

A similar incident took place in 2015, when Indian par-boiled rice sellers had to offer discounts between $150 and $200 for their consignments to be accepted.


“In 2015, prices crashed when bulk vessels reached there. The risk exists at all times which could put exporters into trouble,” the trader said.

Exporters had then lost some 30 percent of their dues, which meant nearly $1.2 million of their income were lost, the trader said.

A trading source said he rescued a couple of exporters from the importers at the African port.

An international firm’s executive said that Nigeria would often abruptly stop rice imports or smuggling when there is over-supply by closing its borders.

“A similar situation arose in 2015. We saw a similar story with regard to Basmati rice exports this year to Iran,” he said.

When contacted, Rice Exporters Association president BV Krishna Rao said exporters very well aware of the risks.

“People exporting to Benin do it understanding that they are taking risks. The risk is because the Nigerian border is sealed for six months sometimes and the consignments will have to be kept at the port there,” he said.

In view of the uncertainty with regard to exports to Benin, small players usually avoid taking risks. “It is the big players who take the risk by exporting to Benin,” Rao said.

Indian rice exporters have been having a phenomenal time this year in view of all-round demand for the foodgrain.

India is also set to export a significant quantity to Bangladesh. The last time when India exported a good quantity to the neighbouring country, its rice shipments hit a record 86 lakh tonnes.

More importantly, this year, China has begun buying from too, with its phytosanitary department clearing purchases from India. Beijing has purchased at least 60,000 tonnes and is seen as a buyer with a potential to purchase five lakh tonnes of rice annually.

However, China would be looking to buy the lower-priced 100 percent broken rice. This year, it has bought the rice at $320 a tonne from two rice mills in India.

One of the reasons why India is doing well on the non-basmati rice front is that the country has ample stocks.

The Food Corporation of India (FCI) has rice stocks of 22.19 million tonnes, besides 10.97 million tonnes of paddy stocks that can yield 7.3 million tonnes of rice.

In addition, the Centre has procured 30.4 million tonnes of paddy that, when milled, can yield 20.25 million tonnes of rice.

This has helped Indian exporters to offer rice at least 10 percent lower than competitors such as Thailand and Vietnam. Rice production in Thailand has been affected due to drought in 2019, while Vietnam’s output has been hit by recent floods besides it decided to export only to the Philippines.

According to Reuters, prices for India’s five percent broken parboiled variety were unchanged at $366-$370 a tonne last week, the lowest since March 26.

In contrast, Thailand’s benchmark five percent broken rice prices ruled $475-$485 and Vietnam’s at $495-$500 per tonne.

India’s competitive price is also being aided by a strong rupee, which is at a month high. On November 26, the rupee was quoting at 73.77 to the dollar.

(Subramani Ra Mancombu is a journalist based in Chennai, who writes on topics in commodities and agriculture)
Subramani Mancombu
first published: Nov 26, 2020 06:05 pm
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