Rice prices jump as exporters turn to more lucrative markets

Saudi Arabia is facing a rice shortage and price hikes because of rising local demand in exporting countries, such as India, and soaring import costs, according to market sources.
Another reason for the shortage is that Asian rice exporters have started tapping new markets, which are reportedly offering better prices for the staple grain.
“These factors have essentially impacted the supply of rice in Saudi Arabia. As a result, rice prices, especially those of Basmati varieties, have been going up,” a market source told Arab News.
There has been an average price increase of 20 percent for a 10 kg bag. A 10 kg bag of Sela Basmati, preferred by Arabs, has increased from SR 54 to SR 68. A 10 kg bag of Kernal Basmati rice, bought mostly by Asian expatriates, has gone up to SR 60 from SR 55. The price of a 40 kg bag surged from SR 190 to SR 260 and is expected to rise further. The retail price has varied in the three major cities of Riyadh, Jeddah and Dammam.
Rice is a major staple food in the Kingdom with annual per capita consumption of about 42 kg and rising. Saudi Arabia is completely dependent on rice imports to meet its requirements. It was the world’s second largest rice importer after Nigeria until last year.
There are about 17 large rice importers out of a total of 180 in Saudi Arabia. Six importers account for 63 percent of the total rice requirement. Over 80 percent of Saudi rice imports constitute the much in-demand Basmati varieties from India. All major Saudi rice importers have a significant presence in India, some of them with their own offices.
Apart from domestic usage by families, Bukhari restaurants are also the main clientele of the grain. According to a Saudi forecast, rice consumption will rise to 1.25 million tons by 2015.
India, Pakistan, Thailand and the United States are major suppliers of rice to Saudi Arabia. India and Pakistan both supply the Basmati variety whereas the United States and Thailand supply large-size grain. India, the largest supplier of rice to the Kingdom, is also getting more orders, at higher prices, from other countries, particularly Iran and Iraq.
To reduce dependence on crucial food grain imports, Saudi Arabia is planning to establish farms in Asian countries. Recently the Ministry of Commerce and Industry approved the establishment of the East Asian Company for Agriculture Development and Investment with a total capital of SR 100 million.
Saudi Arabia imported 914,406 tons of rice in 2006. This rose to an estimated 1,029,000 tons in 2012. Indian Basmati constitutes about 80 percent of these imports. The figure is expected to increase by 3 to 5 percent this year. Ahead of the global food price crisis in late 2006, Custodian of the Two Holy Mosques King Abdullah announced a subsidy on rice imports. Accordingly, a subsidy of SR 1 for each kilogram (SR 1,000 for one ton) was announced. However, the generous subsidy was misused by rice exporters in Asia and notably in India. This was reflected in a drop in imports immediately after abolition of the subsidy on Nov. 29, 2009. Saudi Arabia exempted rice imports from customs duty in 2008 to boost stocks in the Kingdom.
Saudi teacher Umm Salman said the price increase will not affect consumption by her family. An Indian housewife, Azra Kaleem, said the price has been rising for the last two years. She said her family has been buying 10 kg rice bags under a promotional campaign at a leading supermarket chain in Jeddah, but it was still at a higher price than last year.
Riyadh-based Khana Khazana restaurant’s managing director Abdul Haseeb told Arab News that the increase has reduced his profits. Shadab Restaurant in Jeddah, known for its rice-based biryani, is procuring rice in bulk from India at a higher price this year, said owner Isa Shabibi Ayaz.
A prominent rice exporter of India and former president of the Indian Rice Exporters Association, Vijay Sethi, told Arab News in a telephone interview that market conditions determine the price for rice and “the price is not manipulated by internal or external forces.” He expects the price to rise until October, when an expected bumper crop will ensure greater price stability.