Curry lovers may soon be in for a nasty surprise at the checkout, as basmati commodity prices have rocketed on the back of a fall in Indian production and growing demand from the Middle East.
The price of traditional basmati, typically used in branded lines, has jumped over 80% to $1,300/t over the past year [Federation of European Rice Millers]. Pulsa basmati, a higher-yielding variety typically used in own label, has also shot up, by about 65% to $1,100/t.
Prices have soared largely because the 2012 Indian harvest was 25% to 40% smaller than in 2011 as a result of a big reduction in plantings, according to Rice Association director Alex Waugh. Low prices in previous years and an increase in the Indian government minimum support price for non-basmati rice had encouraged farmers to switch away from basmati and farm other varieties, he added.
Suppliers to supermarkets have started to feel the squeeze. “The market is challenging a decline in production in the producer countries has made basmati a much sought-after commodity,” said Jon Calland, head of external affairs at Tilda Basmati.
Our tracker remains dominated by familiar raw materials. EU palm oil prices, for example, continue to edge upwards. Overall, however, palm oil is significantly cheaper than it was this time last year, down 19.9% to £549.5/t.
Following the price highs seen in the middle of 2011, UK prices for cocoa powder are on a downward trajectory too. At £2,131/t, it is now 27% cheaper than at the beginning of 2012, having fallen 5.5% over the past month.
Despite a modest uptick over the past month, prices for Arabica coffee also remain considerably cheaper than last year. With 2012/13 set to be a strong year in Brazil’s production cycle, prices have fallen by 34.5% over the past 12 months.
Strong demand from the Middle East, particularly Iran, has also pushed prices up. “The Middle East is the main export market for basmati with buyers willing to pay cash so that is a real price driver,” said Calland, who added higher costs for energy, fertiliser and labour were also pushing up prices.
As the favoured accompaniment to Indian curry in the UK, Basmati accounts for about one third of the rice stocked in British supermarkets [BrandView.co.uk]. However, it accounts for less than 1% of global rice production and a fraction of rice consumption in India and Pakistan. Governments in both countries are more preoccupied by ordinary rice prices. The Indian government’s continued support for more common varieties is likely to keep basmati prices high. “There is no reason to expect any significant change from the current situation while the Indian government maintains its higher minimum price for ordinary rice,” said Waugh, adding past spikes had done little to upset demand.
The last time basmati prices surged was in 2008, when several governments introduced export bans to try to cap domestic price rises. Waugh warned that some governments could be tempted to introduce bans this year if there was a repeat of last year’s supply problems for maize.
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