JEDDAH: Rice, especially basmati and other high quality varieties, is becoming more of a luxury product, according to a market survey.
"Prices have nearly doubled across the Kingdom and elsewhere in the Gulf over the last few years due to increasing demand and shrinking supply," rice importer Abdul Rahman Alghamdi said.
For example, the price of a 5-kg bag of Tilda basmati rice has increased from SR35 to SR65 in a year, and that of 1-kg pack from SR7 to SR13 in three years.
India and Pakistan are among the main countries exporting basmati rice to the Kingdom.
Basmati's situation is no different from other commodities, according to Deepak Thawani, marketing manager of Tilda International.
He said a recent study suggested that there had been a decline in basmati production in India since 2003.
Imports from Pakistan were also affected due to political reasons.
"Declining production and growing demand for basmati from the Middle East, Europe and the United States will put further pressure on prices," said Khaled Abdul Rahman Marzouki, another rice importer.
Market leaders, however, hope that prices would ease later this year since new harvests in India and Pakistan might boost supply.
The "Tilda Basmati Report: 2008 Market Outlook" says 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," said the report.
Also, consumers across Saudi Arabia and Iran in particular, and the Middle East, Europe and America in general have developed a taste for the rice variety. Growing affluence among India's consumers has also driven up demand.
While worldwide demand soars, Tilda says 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, the costs of cultivating, transporting and shipping rice have gone up. Costs for exporters have likewise escalated.
Basmati is grown only in the foothills of the Himalayas. India is the largest cultivator, but it is also grown in Pakistan, Nepal and Bangladesh.
Saudi Arabia's food import bill has grown by an average 19 percent annually over the past four years to $12 billion in 2007, making it the Middle East's largest food importer, according to a recent SABB study.
Saudi officials are looking at setting up an investment vehicle -- a partnership between the government and the private sector -- to search for agricultural projects in countries with large tracts of fertile land. Saudi investors are also eyeing agriculture projects in the Philippines, Thailand, Indonesia, Senegal, Sudan and Ethiopia.
A private consortium of 15 investors from Saudi Arabia has expressed interest in investing at least $65 million (SR250 million) in developing rice fields in a remote region of Indonesia, a spokesman for the Consulate General of Indonesia, said.
"The investors have indicated they are interested in developing 5,000-10,000 hectares of rice paddy fields each. We are estimating each 5,000-hectare development will require an investment of at least 40 billion Indonesian rupiah," said Hasanuddin Ibrahim, secretary-general at the Indonesian Agriculture Ministry.
Recently, Indonesia announced ambitious plans of becoming a major rice exporter by 2009, even though only as recently as a few years ago it was one of the world's largest importers of rice.
To achieve its goal, Indonesia has set aside 1.6 million hectares for rice production in Merauke in Papua.
By K.S. Ramkumar
© Arab News 2008
