Basmati prices have fallen as a restive Red Sea hurts exports

NEW DELHI : Exports of Basmati Rice have fallen due to militant attacks against merchant ships in the Red Sea, leading to 5-10% fall in basmati prices in the domestic market, exporters said.

Leading shipping lines’ decision to avoid the Suez Canal route amid Houthi attacks has also impacted sunflower oil imports from Russia and Ukraine. Sunflower oil prices in the local market are likely to go up by 3-4% as international prices have increased by $30 per tonne in the last one week to $940 per tonne, trade insiders said. Basmati exporters said the export market has become sluggish and the shipping cost to places like Jeddah, Yemen, Beirut, and Durban have shot up multiple times in some cases.

Prior to the Red Sea crisis, for example, the freight charge to Yemen was $850 per container, which has now jumped to $2,400, they said. Similarly, freight rate to Jeddah have shot up to $1,500 from $300 per container. The rate to Durban has jumped to $1,200 per container from $700.

“Due to this freight hike, buyers are not taking cargo this time,” said Vijay Setia, Former President at All India Rice Exporters Association. “As a result, prices of basmati rice have fallen in the domestic market now.” India annually exports 4-4.5 million tonnes of basmati rice. Gulf countries are the biggest buyers, accounting for nearly 80% of the country’s basmati exports.

While Maersk has said it will resume operations in the Red Sea route, exporters say the shipping line is yet to declare when it will start operations. Sunflower oil importers said the import price has shot up by $30 per tonne, which will impact domestic prices of sunflower oil.

Also, if the import of sunflower oil is diverted through other routes, then the arrival time from the Russia-Ukraine region will go up to 40 days instead of 28 days, said Sandeep Bajoria, CEO of Sunvin Group, an edible oil importer. “Though there is a good supply of edible oils in the Indian markets, the delay and price rise in imported oil will have to be passed on to the consumers by the edible oil companies.” he said.

According to Solvent Extractors Association of India, India’s edible oil imports increased to 15.47 million tonnes (mt) in the first 11 months of the oil year 2022-23 (November 2022 to October 2023) from 12.66 mt a year earlier, registering a growth of 22.15%.