Economy, Business And Markets

Indians Seeking to Resume Rice Export to Iran

Indians Seeking to Resume Rice Export to IranIndians Seeking to Resume Rice Export to Iran

India is expecting to put an end to a slump in the prices of its basmati rice by increasing exports to Iran, as Tehran has announced it has liberalized rice imports.

Iran stopped issuing new licenses for basmati rice import since October last year.

“The ban has automatically been lifted” as domestic rice harvest has come to an end, deputy ministry of Agricultural Jihad, Ali Qanbari, told Reuters on the sidelines of the 26th Annual IAOM Mideast and Africa Conference in Dubai last week.

Qanbari added that the government only bans the imports of the crop during production season.

 Surge in Indian Stock Indices

The ban relief led to an increase in the value of stocks of Indian food companies.

On Tuesday, KRBL Ltd, a rice miller and exporter based at Noida, near New Delhi, climbed as much as 11.5%, Kohinoor Foods surged 20.5% and LT Foods increased 19.5% in Mumbai trading, on prospects of better earnings.

“We have got indications from importers in Iran that they may issue fresh licenses from December or January,” said Rajen Sundaresan, executive director, All-India Rice Exporters’ Association.

Bloomberg quoted KRBL Ltd on Wednesday that rice farmers and mills in India are banking on Iran to end a two-year slump in prices.

Basmati rice prices plunged more than 50% in the past two years after Iran cut purchases and Indian farmers boosted planting.

Indian basmati rice exports to Iran dropped 35% to 935,567 tons in 2014-15 and Saudi Arabia replaced it as the largest buyer.

“As a result of the lifting of ban, however, exports may climb 6.9% to about 1 million tons in the year through March,” said Anil Kumar Mittal, KRBL’s chairman.

India is the world’s largest exporter of basmati rice and ships half of its output of about 8.7 million tons to countries, including Iran, Saudi Arabia, the uAE and Iraq.

Basmati rice, preferred over other varieties for its length, aroma, taste and texture after cooking, is mainly grown in India and Pakistan.

Meanwhile, Iranian rice farmers, according to Deputy Agriculture Minister Abbas Keshavarz, have produced 1.9 tons of the crop which, experts say, has a satisfactory quality this year, thanks to occasional showers in northern Gilan and Mazandaran provinces and high temperature climate which has kept pests away, lowering the need for using pesticides.

The government has adopted supportive policies for rice cultivation in the northern regions, which account for the lion’s share of Iran’s rice production. There are reportedly 210,000 hectares of paddy fields in Mazandaran alone.

 BMI Forecast

In its latest Iran Agribusiness Report, the Business Monitor International forecasts that in the 2015/16 season, which started in August 2015 with the harvest, rice production in Iran will grow for the seventh consecutive year. Output will reach 1.7 million tons, up 2% year-on-year, the BMI estimates.

On the demand side, BMI forecasts rice consumption to grow by 10.2% on the 2014 level to 3.7 million tons in 2019.

India was one of the few countries to have a barter trade system and other payment mechanisms with Iran amid sanctions imposed against Iran over its nuclear energy program, which helped India to import oil and export rice and other items to Iran.

This led to a surge in India’s basmati rice exports and Iran quickly overtook Saudi Arabia and the UAE to become the largest buyer of Indian basmati rice in 2012/13.

With the lifting of sanctions, the BMI expects Iran to diversify its import sources after the lifting of nuclear sanctions, looking to producers in Thailand and Pakistan.