Regaining the lost Mexican market

Lahore, December 22, 2014 (PPI-OT): At a time when rice exports are declining, there are hopeful signs of regaining the Mexican market, which Pakistan lost last year after one of its shipments was found infested with Khapra Beetle larvae.

The optimism follows the talks held between the TDAP officials and a two-member Mexican rice quarantine delegation in the second week of the current month on the prospects of removal of the ban on export of Pakistani rice to Mexico.

They also visited various facilities to ensure that processing, quality assurance, storage and packing of rice for export was in place.

Although Pakistan’s export to Mexico had been on the rise, it was in the first six months of 2013 that a major breakthrough was attained and the Pakistani rice constituted over 23pc of that country’s milled rice imports.

In June 2013, the Khapra Beetle incident took place involving 3,000 metric tonnes of rice which finally led to an indefinite ban on Pakistan’s valued export commodity. Central America also followed suit and banned Pakistani rice.

A similar situation had arisen in 2007 when Russian officials had complained of presence of Khapra beetle pest in some rice shipments of Pakistan. In 1995, Pakistan along with Sri Lanka, India and Thailand were denied access by Mexico to their rice market under WTO’s Sanitary and Phytosanitary (SPS) rules.

In Pakistan’s case, the ban was lifted after President General Pervez Musharraf visited Mexico in 2004. Before the ban, Pakistan’s rice export, mainly of basmati, amounted to $273m. The situation in the rice sector has not been very edifying. At present, Basmati rice is being sold in the international market at $1,300-1,500 per tonne.

Pakistani price is $100 to $200 per tonne below the Indian rice. And India has had a bumper rice crop this season. The current season has proved to be a difficult one for rice growers because of lower prices.

A pickup in the harvest has caused a drop of about 50pc in paddy prices, compared to last year’s prices, and these are likely to fall further if the rice millers continue to delay buying of the growers’ produce. Meanwhile, the compensation of Rs5,000 per acre to flood-hit growers by the federal government has not brought solace to them for they now contend that their per-acre loss this time has exceeded Rs40,000.

Millers and brokers are unwilling to buy paddy in an uncertain situation marked by fluctuating costs. The price of paddy has dropped by Rs1,000/40kg to around Rs1,500-1,600 against the last year’s price of Rs2,500-2,600/40kg.

Hamid Malhi, president of Basmati Growers Association says “this is a man-made crisis… a group of paddy buyers is deliberately delaying the buying”. Farmers have asked the government to immediately announce subsidy to them by providing subsidised fertilisers, seeds and diesel for the next crop.

Meanwhile, another rice crisis may be in the making. On November 22, rice exporters warned the government to refrain from buying the commodity from farmers by guaranteeing them high prices. If it does so, they said it would be destabilising the private sector and, as a result, the country could lose its traditional rice markets.

Chairman, Rice Exporters Association of Pakistan (REAP) said in a statement that the government’s involvement in business activity such as procurement would be harmful to the private sector, which has invested billions of rupees to build an infrastructure and human resources.

“In case of the government’s involvement in rice business, we will lose huge foreign exchange, as well as credibility, which the rice exporters have earned after long hard work.”

He asked the government to give free hand to the private sector for playing its positive role in improving the economy. At present, the international market is depressed and all the rice exporting countries are facing tough competition and prices are on the decline. “This is the market phenomenon and due to the demand-supply aspect, we see such trends on certain occasions and have to cope with it,” he asserted.

The REAP chief recalled how Passco, in 2008, procured 200,000 tons of rice at a premium price and “even after six years it could not dispose of those stocks and ultimately had to face losses of up to Rs24 billion.”

The government should also not intervene through the Trading Corporation of Pakistan (TCP) and Pakistan Agricultural Storage and Supplies Corporation (Passco). Under the prevailing situation, it is crucial that exporters try to explore new markets.

South America is one of the non-traditional markets for Pakistan. In this region, to name a few, Cuba, Brazil, Chile, Haiti, Puerto Rico and Peru are some of the countries that should be explored. Mexico, which Pakistan is about to regain, is the most important market.

For more information, contact:
Rice Exporters Association of Pakistan
405/421, 4th Executive Floor, Sadiq Plaza, The Mall,
Lahore – Pakistan
Tel: +9242 36280146, 36280195 and 36374020
UAN: +9242 111-555-992
Fax: +9242 36280196

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