Production:

Assuming a normal 2015 monsoon (June to September), MY 2015/16 (October/September) rice production is forecast at 104 MMT (44 million hectares), marginally higher than last year. In MY 2014/15, higher production costs and relatively weak domestic prices created low profit margins. Nevertheless, Post expects that farmers will continue to plant rice due to expectations of prices increases in the government's MSP. Other crops are not sufficiently supported by the government's grain procurement program. Because 40 percent of the rice crop is unirrigated and depends on a good monsoon, a poor and erratic monsoon in 2015 could potentially bring down production by 10 to 12 MMT from the forecast level, while adequate and well distributed rains may further augment forecast production by 2 to 3 MMT.

MY 2014/15 rice production is estimated at 102 MMT (42.5 million hectares) on lower yields of kharif (fall planted) rice and less acreage of rabi (winter planted) rice. Despite higher kharif rice acreage, delayed plantings and erratic monsoon rains from June to August 2014 negatively affected yields in unirrigated areas. Relatively lower water levels due to below normal monsoon rains, coupled with relatively weak domestic prices, have affected planting prospects for the upcoming rabi rice crop. Latest official planting figures for the rabi season crops are significantly lower than last year (1.5 million hectares compared to 1.8 million hectares). Consequently, Post continues to estimate MY 2014/15 rice production and area at 102 MMT (kharif 89.5 MMT and rabi 13 MMT) and 42.5 million hectares (kharif 38.2 million hectares and rabi 4.3 million hectares). The government's 2nd Advance Estimate places MY 2014/15 rice production marginally higher at 103 MMT, largely on higher rabi rice production, but these estimates are subject to future revisions.

India's long-grain Indian Basmati rice is traditionally grown in Punjab, Haryana and western Uttar Pradesh. For MY 2014/15, Basmati rice production is estimated at 8.8 MMT (2.0 million hecatares), up 1.2 MMT from last year. MY 2015/16 is forecast to increase further to 9.5 MMT. Despite relatively lower Basmati prices, farmers are expected to expand area using the PUSA 1509 variety as net returns have reportedly been considerably better than other Basmati and coarse rice varieties.

Rice is the most important food crop in India, contributing more than 40 percent of total food grain production. Although about 60 percent of the rice area is irrigated, rice is predominantly a rainfed kharif season crop with most of the planting closely riding on the onset and progress of the south-west monsoon rains during June through August. However, a small rabi crop taken is grown in the states of West Bengal, Andhra Pradesh, Odisha and Tamil Nadu.

Although India's rice production shows a steady upward trend, production is subject to wider year-on-year fluctuations compared to wheat as the crop is highly dependent on monsoon rains. Expert reports that due to the intensive water and labor use in rice cultivation and diversion of agricultural land for non-agricultural use, rice cultivation area has hit a plateau (around 44 million hectares).

India's overall rice yields are well below the world average, and there are wide variations in rice productivity among the various producing states in the country. Consequently, there is scope for increasing productivity by expanding irrigation facilities and adopting technology. In 2010/11, the GOI launched an initiative to bring the Green Revolution to eastern India by promoting the Green Revolution and other improved technologies to the eastern region of the country (e.g., Bihar, Chhattisgarh, Jharkhand, eastern Uttar Pradesh, West Bengal, and Odisha). The eastern states have realized significant productivity gains in the last few years. The GOI also promotes a "System of Rice Intensification" technology in some rice growing states, which requires less water and chemical fertilizer, but the adoption of this system is relatively slow as it is highly labor intensive.

Agricultural policy makers and experts are increasingly concerned about meeting projected food demand after 2020. Surplus rice growing states like Punjab, Haryana, Uttar Pradesh, Andhra Pradesh and West Bengal, Orissa and other eastern states follow intensive rice-wheat or rice-rice cropping systems, and are facing severe environmental issues, including declining water tables, deteriorating soil health, and emergence of resistant disease/pests in the growing areas. Some state governments are promoting crop diversification to lower water intensive crops like corn, and other horticultural crops, but the higher yield and price variations in these crops discourages farmers to shift out of rice. A significant cropping shift out of rice is not imminent in the near future due to the government's continued emphasis on supporting rice-wheat production for food security and a lack of more profitable and lower risk crop rotation alternatives.

Indian rice cultivation also faces the challenge of global warming and climate change. A significant share of the rice crop is produced in the coastal regions, which are susceptible to a rise in the sea level. Climate change issues like glacier melting and aberrations in the monsoon rain patterns may also potentially affect the rice crop in the mainland.

Hybrid Rice: There are about 50 varieties of hybrid rice, most developed by private seed companies, of which about 25 are popular in the market. Most of the hybrid rice is cultivated in eastern India (e.g., eastern Uttar Pradesh, Bihar, Jharkhand, and Chhattisgarh). The National Food Security Mission set a target to plant three million hectares to hybrid rice by 2011-12. Despite sustained government efforts, area under hybrid rice is estimated at 1.8 million hectares in 2014/15, largely unchanged over the last three years. Growth of area under hybrid rice is severely hampered by (i) the inability to cater to different consumer quality preferences, (ii) low incremental yield realization, and (iii) poor milling quality over traditional varieties. Nevertheless, several private seed companies and public sector institutions are developing improved hybrid rice varieties that have higher quality and yields, which may accelerate hybrid rice adoption in the future.

Biotechnology: Efforts are also underway, mostly in the private sector, to develop transgenic rice varieties to incorporate resistance to various pests, diseases, and abiotic stresses. However, approvals and commercialization of transgenic rice are still years away. Several public sector rice research organizations are doing work on marker assisted breeding of rice for resistance to biotic and abiotic stresses and incorporating quality traits.

Consumption:

Rice consumption in MY 2015/16 is forecast at 99.5 MMT, marginally higher than the MY 2014/15 consumption of 99.2 MMT, on forecast sufficient domestic supplies and stagnant per capita consumption. Rice is the major staple food for more than 70 percent of the Indian population. More than 4,000 varieties of rice are grown throughout the country to meet varied consumer preferences. The latest National Sample Survey for the Indian fiscal year 2011/12 (April/March) shows a steady decline in the per capita consumption of rice in the last few years. With the growing economy and expanding Indian middle class, Indian consumers are increasingly diversifying their diet to include higher value and nutritious food instead of the basic fillers like rice and wheat.

Government Procurement and Supplies for Food Programs

Rice is one of the most important food grains for the government's PDS and other food security programs. For government procurement purposes, rice is classified into two categories - Common (length to breadth ratio less than 2.5) and Grade A (length to breadth ratio more than 2.5). In the past, most rice under the government procurement program came through a mandatory levy on local millers. Depending on the state, local rice millers must sell to the government a fixed portion of their milled rice at pre-established rates, called the "levy price," which are linked to the MSP of paddy rice plus milling costs. With the government's raising the MSP significantly in recent years, local millers have reduced their purchases of paddy rice for milling. In the recent years, the government has been largely procuring paddy rice bought at the support price, which is subsequently custom-milled for the government by private millers at the government expense for storage and distribution through the PDS.

India: Government's Rice Procurement and PDS Operation

Marketing Year

Production

GOI Procurement /1

MSP for Paddy (Unmilled Rice Common variety)

GOI Economic Cost

Offtake from GOI Stocks

PDS Issue Price

(Oct-Sept)

(Million Tons)

(Million Tons)

Rs. per ton

Rs. Per ton

(Million Tons)

Rs. per ton

APL

BPL

AAY/NFSA

2005/06

91.79

27.58 (30.0)

5,700

13,036

na

7,950

5,650

3,000

2006/07

93.35

25.11 (26.9)

6,200

13,912

na

7,950

4,150

3,000

2007/08

96.69

28.74 (29.7)

7,450

15,499

na

7,950

4,150

3,000

2008/09

99.18

34.10 (34.4)

9,000

17,407

25.69

7,950

4,150

3,000

2009/10

89.09

32.03 (36.0)

10,000

18,201

28.35

7,950

4,150

3,000

2010/11

95.98

34.20 (35.6)

10,000

19,831

31.97

7,950

4,150

3,000

2011/12

105.30

35.04 (33.3)

10,800

21,229

31.44

7,950

4,150

3,000

2012/13

105.24

34.04 (32.3)

12,500

23,049

31.39

7,950

4,150

3,000

2013/14

106.54

31.84 (29.9)

13,100

26,155

30.65

7,950

4,150

3,000

2014/15 /2

102.00

30.00(29.4)

13,600

28,179

na

7,950

4,150

3,000

2015/16 /2

104.00

na

na

na

na

7,950

4,150

3,000

Source: Ministry of Agriculture and Food Corporation of India, GOI

Notes: Exchange rate INR 62.1 = US$ 1 on February 10, 2015

/1- Figure in parentheses is GOI procurement as percentage of total production

/2 - FAS/New Delhi estimate

PDS - Public Distribution System; APL - Above Poverty Line; BPL - Below Poverty Line; and

AAY -Antyodaya Anna Yojana (Poorest of the Poor); NFSA-National Food Security Act

Due to a modest increase in the MSP over last year, in MY 2014/15 government rice procurement has been slow. On February 2, 2015, official sources estimate rice procurement at 19.8 MMT (21.34 MMT last year). Lower open market pricing may support government rice procurement in the coming months. In MY 2014/15, overall rice procurement is likely to be lower than last year, currently estimated at 30 MMT. Despite estimated lower procurement, stocks are sufficient to meet the GOI's estimated annual requirement under the PDS and other feeding programs (31 to 32 MMT) in IFY 2014/15. As in the case of wheat, there has been no increase in the retail price of rice distributed through the PDS since July 1, 2002, while the MSP has more than doubled over the last decade.

The livestock feed industry uses deoiled rice bran and broken rice. Small quantities of inferior quality and damaged rice also get used as fillers in the poultry and livestock feed sectors. However, there are no official or industry estimates available for rice feed consumption.

Prices

At the beginning of MY 2014/15, domestic rice prices eased on sufficient domestic supplies and relatively weak international prices. Market prices are expected to remain steady on relatively strong domestic supplies.

Trade:

After the export ban on non-Basmati coarse rice was removed in September 2011, India has emerged as one of the world's leading rice exporters. For MY 2015/16, India's rice exports are forecast down to 8.5 MMT (4.5 MMT coarse rice and 4.0 MMT Basmati rice) on relatively tight exportable supplies.

The MY 2014/15 export forecast is 9.0 MMT (5.8 MMT coarse rice and 3.2 MMT Basmati rice) on strong export pace and competitive pricing. Since September 2014, exports have surged on sales to Sri Lanka and other traditional markets in Africa and the Middle East. Government is unlikely to impose any export restrictions on rice exports due to high domestic supplies.

Preliminary CY 2014 export figures from official and private sources indicate export sales totaling 10.88 MMT. Major export destinations were Saudi Arabia, Iran, Senegal, Bangladesh, Sri Lanka, U.A.E, Nigeria, South Africa, and Guinea.

Stocks:

On February 1, 2015, government-held rice stocks declined to 25.2 MMT due to uncompetitive pricing (see Government Procurement and Supplies for Food Programs section). At the current pace of domestic sales and procurement, on October 1, 2015, government rice stocks are forecast to decline to 12.0 MMT (compared to 17.6 MMT during the same time last year), but will still be higher than the GOI's desired stocks of 10.3 MMT.

There is no published information, official or industry, about privately held rice stocks. Relatively tight domestic supplies and steady export demand are likely to draw down the privately held MY 2014/15 ending stocks to 4.6 MMT. The rice PS&D table includes both government stocks and estimated privately held stocks.

Policy:

Production and Market Support:

The GOI and various state governments follow the same production policy for the two most important food crops: rice and wheat. However, the GOI, with the support of state governments, has also undertaken various rice-specific development schemes like the Special Rice Development Program (SRDP) and Promotion of Hybrid Rice (price subsidies on seed).

The government also undertakes a domestic price support, procurement, and distribution program for rice. The GOI has banned futures trading in rice since September 2007 on price inflation concerns as policy makers believe that futures trading may lead to speculation.

Trade:

On September 9, 2011, the government lifted the export ban on non-Basmati rice, which had been in effect since September 2007 (with ad hoc humanitarian exports exempted from time to time). However, exports of Basmati rice continued without quantitative restriction throughout the period, subject to a minimum export price (MEP), which changed from time to time. On July 4, 2012, the government removed the MEP requirement on exports of Basmati rice.

In March 2008, the GOI removed the import duty on rice, but there have been no imports due to uncompetitive pricing and consumer preference for local varieties.

Marketing:

Indian high-quality Basmati and select premium coarse grain varieties compete against U.S. rice in several markets, particularly the Middle East and various European countries. India also exports rice to the United States, which mostly caters to consumers whose family histories originate from the Middle East and South Asia.

India: Commodity, Rice, Milled, PSD

(Area in thousand hectares and quantity in thousand metric tons, Yield in MT/Hectare)

Rice, Milled

2013/2014

2014/2015

2015/2016

Market Begin Year

Oct 2013

Oct 2014

Oct 2015

India

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

43,940

43,950

43,500

42,500

0

44,000

Beginning Stocks

25,440

25,440

22,651

22,711

0

16,560

Milled Production

106,540

106,600

102,000

102,000

0

104,000

Rough Production

159,826

159,916

153,015

153,015

0

156,016

Milling Rate (.9999)

6,666

6,666

6,666

6,666

0

6,666

MY Imports

0

0

0

0

0

0

TY Imports

0

0

0

0

0

0

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

131,980

132,040

124,651

124,711

0

120,560

MY Exports

10,149

10,149

8,700

9,000

0

8,500

TY Exports

10,800

10,880

8,700

9,000

0

0

Consumption and Residual

99,180

99,180

99,151

99,151

0

99,500

Ending Stocks

22,651

22,711

16,800

16,560

0

12,560

Total Distribution

131,980

132,040

124,651

124,711

0

120,560

Yield (Rough)

3.6374

3.6386

3.5176

3.6004

0.0000

3.5458

India: Commodity, Rice, Milled, Export Trade Matrix

Exports for

CY 2013

CY 2014 /1

U.S.

127,527

U.S.

164,917

Others

Others

Iran

1,671,205

Saudi Arabia

972,701

Saudi Arabia

888,430

Iran

926,272

Senegal

739,165

Senegal

651,411

South Africa

450,950

Bangladesh

589,815

UAE

390,273

Sri Lanka

467,540

Cote D' Ivorie

292,953

UAE

414,536

Liberia

289,646

Nigeria

383,721

Cameroon

288,766

South Africa

322,546

Bangladesh

272,170

Guinea

321,859

Yemen

212,437

Liberia

260,281

Guinea

197,667

Kuwait

226,046

Total for Others

5,693,662

Total for Others

5,536,728

Others Not Listed

4,738,132

Others Not Listed

4,259,301

Grand Total

10,559,321

Grand Total

9,960,946

/1 Provisional data for the period January through November 2014

Source: Directorate General of Commercial Intelligence, GOI