The Rice Exporters Association of Pakistan (REAP) is a private body that works with the ministries of Commerce and Food, Agriculture and Livestock—as well as the Planning Division—to maintain the sector’s market share and ensure sufficient stocks for local consumption.
The organization, established in 1988-89, has grown to the second-largest export trade body of Pakistan, after the textile sector. It contributes over $2 billion per annum in export revenue for the country. Incumbent REAP Chairman Malik Faisal Jahangir recently spoke with the Standard on the current year’s export targets and challenges facing Pakistan’s rice exporters. Excerpts:
What is the target for this year’s rice exports?
Pakistan’s rice exporters have set a target of $5 billion for fiscal year 2024-25. Last year, the country exported over 6 million tons of various rice varieties, with projected earnings of over $4 billion. This marked a significant increase from previous years, driven by a bumper crop and robust international demand.
[Over the past year], REAP has emphasized the need for a comprehensive strategy focusing on modern seed research and the promotion of standardized agricultural practices to further boost exports.
The government has set an ambitious target of increasing annual rice exports to $10 billion by 2030. Achieving this will require focus on improving quality assurance and global brand management.
How do this year’s exports compare to those of last year?
In 2023-24, the Rice Exporters Association of Pakistan exported 6,010,983 metric tons of rice, with a total value of $3.931 billion. The year prior, we exported 3.717 million metric tons, with a total value of $2.149 billion. This represents an increase of 61.5% in quantity and 83.5% in value over just one year.
How does India ending its rice export ban impact Pakistan’s potential?
In 2023, India, the world’s largest exporter of rice, had banned the export of non-basmati white rice, triggering a global price surge. India’s late 2024 decision to end the ban will have multiple, direct impacts on Pakistan.
Chief among these is increased competition, as prior to its ban India had dominated the non-basmati rice sector. This raises the stakes for Pakistan, as India has the ability to offer rice at lower prices due to its larger production scale and subsidies. In fact, the year spanning the ban saw Pakistan boost its rice exports, especially to countries in Africa and the Middle East. India’s re-entry into the market may see Pakistan lose some of these key markets.
India’s return would likely also trigger a price reduction of rice products, which would pressure Pakistan’s exporters to lower their own prices to remain competitive. This could, potentially, squeeze profit margins.
Can you explain the dynamics for rice demand globally?
Global demand for rice remains strong, especially in regions like Africa, the Middle East, and Southeast Asia. However, the demand for different types of rice varies. The Middle East, Europe and North America prefer basmati rice, which both Pakistan and India export. Pakistan has a reputation for premium basmati rice that helps insulate some of India’s challenge to its exports.
Non-basmati rice is most popular in African regions, where demand for cheaper rice is growing. Pakistan had a better chance of capturing this market when India banned its exports, but the end of the ban would have Pakistan reckon with a price-sensitive market. Pakistan is also unable to compete with India’s ability to offer large volumes at lower prices.
Overall, the global rice market has seen a lot of price volatility in recent years, arising from export bans, weather conditions, and changing global supply chains. If India manages to recapture the market from Pakistan, the country will see lower export revenue due to lower prices. The sector would also see fewer profits, as production costs in Pakistan have spiked due to inflation, fuel price hikes, and logistical challenges.
How do Pakistan’s macroeconomic challenges affect its rice export capabilities?
Pakistan’s broader macroeconomic framework has an important, influencing factor on its rice export capabilities. Years of high inflation, rising fuel prices, and currency depreciation have increased the cost of rice production. Resultantly, Pakistani rice exporters face challenges in maintaining competitive prices in the face of falling global rice prices.
General consensus holds that currency depreciation helps exports. However, this has the added consequence of high costs of inputs such as fertilizers and seeds. This erodes profit margins for exporters.
Pakistan’s economic instability has also led to logistical and infrastructure challenges, further raising the cost of exporting rice. Port congestion, transportation inefficiencies, and high freight costs can make Pakistani rice less competitive compared to that of India, which benefits from better infrastructure and government support.
All these factors combine to slow Pakistan’s export growth potential, especially in the face of stiff competition from India. To remain competitive, Pakistan may need to focus more on value-added rice products, such as processed, packaged, or organic rice. This will enable it to target niche markets that can bear premium prices, potentially offsetting pressures of price reductions in the bulk rice market.
Additionally, exporters can explore untapped or less competitive markets, particularly in regions that are not heavily reliant on India’s rice exports, such as parts of Latin America or Eastern Europe.
Can you summarize the major challenges currently facing rice exporters in Pakistan?
One of the main issues remains competition from other countries, particularly India, Thailand, and Vietnam. This competition leads to fluctuations in global rice prices, making it difficult for Pakistani exporters to remain competitive.
Another challenge is the lack of infrastructure and logistics within Pakistan, including inadequate transportation networks, storage facilities, and port handling capabilities. This can lead to delays, damage to goods, and increased costs, ultimately affecting the quality and competitiveness of Pakistani rice in the global market.
Pakistani rice exporters also face quality control issues, including inconsistent quality, contamination, and adulteration. This can damage the reputation of Pakistani rice and lead to a loss of market share.
Other challenges include trade barriers and tariffs, climate change and weather-related disruptions, and limited access to finance and credit facilities.
To overcome these challenges, Pakistani rice exporters must focus on improving quality, investing in infrastructure and logistics, and developing strategies to remain competitive in the global market.