05 June 2008

Dubai:  Prices of basmati rice, which is becoming more of a luxury product, will continue to remain strong until next year due to increasing demand and shrinking supply, rice retailer Tilda has warned.

Data released by the company showed that a five-kg bag of Tilda pure basmati has increased from Dh42 to over Dh60 in the past year, and a one-kg pack from Dh9 to Dh13.

Deepak Thawani, marketing manager of Tilda International, said Basmati's situation is no different from other commodities. He said recent study suggested that there has been a decline in traditional basmati production in India since 2003.

"Declining production and growing demand for basmati from Middle East, Europe and US will put further pressure on prices," Thawani told Gulf News.

However, Kamal Vachani, director of Al Maya Group, said prices were likely to ease later this year, since a new round of harvest in India is expected to boost supply soon.

"It's just a matter of supply and demand. The new crop expected in India will ease the price. It will not come down straight away, but maybe later this year," he said.

Market size
The UAE's market size for basmati is approximately 90,000 metric tonnes, according to Thawani. Total imports of basmati rice in the UAE last year were estimated at 175,000 metric tonnes. About 100,000 metric tonnes were re-exported to Iran from the UAE.

For UAE consumers who are already feeling the pinch of global food inflation, the rising cost of basmati - a staple for many residents - is certainly adding pressure.

A recent survey by the Emirates Consumer Protection Society noted that the UAE's annual food price inflation could reach 40 per cent this year from 27 per cent last year.

The "Tilda Basmati Report: 2008 Market Outlook" said that a lot of factors are conspiring to push prices of basmati to record levels.

"The demand for basmati rice in the UK has soared. Basmati today is a vital ingredient for many British consumers, not just those of Asian origin. Basmati is now the dominant rice product in the UK, accounting for nearly half of the rice consumed," the report said.

Also, consumers across Europe, America and the Middle East, particularly Saudi Arabia and Iran, have developed a taste for the rice variety. Growing affluence among India's consumers has also driven up demand.

"Indian consumers have become more affluent, they have moved to basmati rice from cheaper, lower quality varieties," it said.

While worldwide demand soars, Tilda said basmati rice production fails to keep pace, as farmers have been plagued with poor harvest, water shortages and increasing cultivation costs.

Rising oil prices are also partly to blame. With oil prices now at record levels, Tilda said the cost of transporting and shipping of rice has gone up.

Costs for exporters have likewise escalated, as the value of the rupee has appreciated against the dollar.

By Cleofe Maceda

Gulf News 2008. All rights reserved.