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Winter Woes

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While the winter crop makes up only around an eighth of India's rice output, any sign of falling production in the world's second-largest exporter could help support Asian prices that have already more than trebled this year.

With just 30 million tonnes of the grain traded annually, government supply curbs, such as those in India and Vietnam, have spooked importers at a time when global stocks have halved from a record high in 2001. India, the world's biggest exporter of rice last year after Thailand, has slapped a tax on overseas sales of its aromatic basmati variety of rice.

"Farmers will get 15-20 per cent less from rice processors or exporters and they may switch to oilseeds," Prem Garg, managing director of the Lal Mahal group, told Reuters in an interview.

"If we have to pay higher tax, we cannot pay farmers much to procure paddy," added Garg, who said his firm shipped around a fifth of India's total exports during the year to March 2008.

Summer-sown rice, which accounts for most of India's 92 million tonnes of total output from two crops, is planted during the monsoon months of June and July and harvested by October.

Before the government banned exports of non-basmati rice in March, India used to export 4 million tonnes of a year, including about a million tonnes of aromatic basmati, which is exclusively grown in the northern parts of India and Pakistan.

"I believe rice production can fall by 5 percent due to the decisions of the government to ban non-basmati rice exports and restrict basmati exports," Garg added. "Farmers will not be interested in rice anymore."

Other Countries Muscle In
Export curbs in India, which traditionally sold rice to Europe and the Middle East, were helping other countries, he added.

"Pakistan is now selling at $1,500 a tonne from last year's $700 a tonne. Pakistan is getting India's share and next year it will export even more," he said. Brazil may also gain from India's export curbs, he added.

Last month, Brazil suspended rice exports from government stockpiles but Garg said private firms in Brazil were a threat for Indian exporters. "Some companies from Brazil have supplied 500,000 tonnes of rice to some African countries at $460-$470 a tonne," he said.

The summer-sown crop of roughly 80 million tonnes is larger than the winter-sown crop of about 12 million tonnes, because farmers plant wheat, another key staple, during the cold season. Garg said the country did not need export restrictions. "Some countries do have a shortage but others have surplus to help them tide over scarcity. The rice shortage is not real. It is an artificial shortage," he said.

The world had 4 million to 5 million tonnes of surplus rice and good crops were expected in India, Pakistan and Italy, Garg added. "So where is the problem?"

Exporters should have been allowed to sell at least a quarter of their average exports in the past three years to help them meet committed sales in annual contracts, he said.

Global production of rice, a staple food for more than half the earth's population, stands at around 430 million tonnes while only 30-32 million tonnes of rice were traded, he said.