JEDDAH, 31 July 2007 — Basmati rice prices have soared to historic highs in Saudi Arabia due to a decrease in supply from the previous harvest.
Manar Al-Baroudi, marketing manager of Tilda Company in Saudi Arabia, said the arrival of the Indian crop in October saw anxious buying activity amid low global stock levels.
“Initial panic buying led to traditional Basmati prices rising quickly to 30 percent over the previous season,” said Al-Baroudi. “Opening market prices started at 1,700 to 1,800 Indian rupees per quintal at auction. With such high prices many buyers remained cautious. However, by April prices at auction were soaring, achieving 2,200 Indian rupees per quintal. This represents an increase of 55 percent over 2005 prices.”
Al-Baroudi said that for Pusa & Super Basmati prices also climbed rapidly reaching 1,350 Indian rupees per quintal. This was 30 percent higher than last season and again buyers might have anticipated the market had peaked.
“In the space of approximately three weeks the value of the rupee appreciated by about 12 percent against the US dollar and this has now started to be reflected in the prices quoted by exporters,” Al-Baroudi said.
The situation in Pakistan is even more acute as rice shipments have rapidly declined and created shortages. According to market analysts, a widespread fear of an American food embargo has caused Iran to stockpile three years worth of consumption, paying in some cases almost double last year’s price. Most of the rice is being officially exported to Iran, but instances of smuggling have been reported by the English language daily Dawn.
An increase in the price of commodities has forced the government to ban the export of pulses from Pakistan. In the case of rice, prices in the local market have risen 50 to 75 percent and the country may soon be importing rice for the first time in its history to meet domestic demand.
With the next crop not due until November 2007 and the scarcity of Basmati, there will be increased incentives for unscrupulous traders to adulterate their rice with inferior and non-Basmati grains despite the fact this practice is outlawed in the European Union and other countries.
He added that price increases had already begun to filter through the supply chain on the back of the initial 30 percent rise observed at harvest time in October 2006.
Meanwhile, a report of the Ministry of Commerce and Industry a couple of days ago showed a rise in the prices of the major food items while the prices of red meat including locally-bred meat and sugar showed a slight fall in the second quarter of the year.
The consumer price index in the Kingdom rose by 0.2 percent in June compared to the previous month, the Saudi Press Agency reported. Because the riyal is pegged to the dollar, a weakening US currency can cause inflation in products and services, especially goods and services from the Euro zone.
