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Salient Features of the International Rice Market 

• Trade of Residual Supply

- Govt. in most rice growing countries protect bothconsumers and farmers from price variation bymaintaining non- price barriers between domestic

and international markets• As a result, international trade in rice has become a

function of excess domestic supply over demand

• The trade is not much responsive to world prices.

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Salient Features of the International Rice

Market

• Thin International Market

- world rice market is thin in relation to worldproduction

- Less than 5 percent of annual rice productionis traded internationally.

- Bulk of rice production occurs in the Asian

countries which are also major rice consumers

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Salient Features of the International Rice

Market

• High price volatility

- Thinness of the international market leads to

increased price volatility

- It creates added incentives for self sufficiency

in rice, further thinning the market

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Salient Features of the International Rice

Market

• High search and transaction cost

- fluctuation in the participants’ share in themarket

- absence of fixed trade channel leads to highsearch and transaction cost

- Each decision to enter the market generally

requires a new search for trading partner.

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Salient Features of the International Rice

Market

• Non-homogenous commodity

- different varieties and grades are preferred

by different consumers

- Many attributes influence the value of the

produce resulting in large price differentials

among different grades

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Indicators of global competitiveness

• Basmati rice

• Location: karnal, Haryana

• Exported from kandla port

•

NPC = 0.89• EPC = 0.88

• ESC = 0.74

• DRCR = 0.48

•Although basmati rice is sufficiently pricecompetitive, India has failed to perform sufficientlywell in rice trade

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Perspective on rice exports

• Supply constraints

- Need to augment production of basmati rice

- Backward and forward linkages to farmers

• Procurement constraints

- Lack of requisite statistics for purchase planning by

the exporters

- High incidence of local taxes/charges

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Perspective on rice exports

• Processing constraints

- Excessive investment in rice milling capacity

- milling capacity of 286 million tons of paddy against

production of about 120 million tons.

- low cost of installation and replacement of rice

huller

- low capacity utilization (180-220 days in a year)

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Perspective on rice exports

• Low incidence of modern rice mills

• Levy disincentives to exporting rice mills

- most exporters are merely traders instead of 

processor-cum-exporter

• Exporter pre-qualification is absent

- only registration with APEDA

- most rice traders are fly-by-night operators, strivingto maximize short term gains

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