Outlook on the non-Basmati rice prices in local Indian markets

Bullish points

1. Government is procuring in large quantities and also opening more procurement centres.
2. The MSP set by the government is reasonably high and there is even an expectation of a bonus on top of the buying price
3. The opposition government has promised farmers in Chattisgarh state that they will increase the government purchase price (MSP or minimum support price) further if they come to power. Election results are expected on December 13, 2018.
4. Some farmers have stopped selling paddy in anticipation of opposition coming to power and increasing the government purchase prices.

Bearish

1. The new crop has started in all regions; crop is expected to be good
2. In reality the government always purchases a limited quantity; the remaining has to be sold on the open market anyways. This was the case in Gujarat, where the government had made big promises initially but later purchased much less than promised.
4. Demand for export is low

Overall

Rice prices in INR are expected to be stable. There may be more clarity once election results are announced tentatively by the end of next week.

Outlook on the Indian Rupee

Crude oil prices seem to have a significant influence on the Indian rupee, as India imports significant quantities of oil. So for instance, if crude oil prices move up, the rupee is expected to depreciate, making exports cheaper. Since we don’t have an outlook on factors like crude oil, etc, we are unable to given an outlook on FOB prices in USD.