Heavy rainfall in Pakistan increases uncertainty around new crop rice sales: sources

London — The Pakistani 2020 rice harvest has been delayed by the monsoon rainfall, sources said this week.

Heavy showers have affected harvesting for most of August, with only small volumes arriving in Karachi in recent days at a time when harvesting typically goes into full swing, and this trend shows no signs of abating, market participants said.

According to the Pakistan Meteorological Department, "heavy to very heavy" rain is expected in Sindh between Aug. 24-26 and in Punjab between Aug. 25-27, with Karachi liable to localized flooding during this period.

Exporters are increasingly reluctant to offer new crop IRRI-6 rice for September shipment as a result, with most opting to offer significant volumes for October shipment only.

While small amounts of new crop will be available for September shipment, it is expected to have both a high moisture content due to the rains and a high percentage of chalky kernels, which are typical for early paddy arrivals, they said. Moisture content is anticipated to be around 15%-16% during September, while export standards and most buyers require a maximum of 14%.

Additionally, the limited remaining 2019 crop stocks contain high levels of damaged and yellow kernels, making the shipment of any crop in September a risk as buyers disappointed with the quality are likely to claim compensation against exporters. As one exporter noted, "September is trouble."

Consequently, it is likely that exports during this month will decline significantly year on year, sources said.

As in most years, some exporters have bet on a bearish market and sold forward for October shipment, even though local forward prices do not currently underpin the traded export prices.

Sales of Pakistani 5% broken white rice to China for this period have been heard at around $390/mt CFR Chinese ports (including broking fees), with some exporters noting that this price would have to be at least $20/mt higher to align with the current local prices.

One such exporter remarked that some "people don't learn and they try to be clever," with a local broker observing that aggressive selling at this time of the year is typically a "mistake."

Because of uncertainties caused by the Pakistani harvest and global market volatility, a majority of exporters appear to be cautious, preferring to wait until September before offering significant volumes for October shipment, sources added.

While Pakistani white rice export prices are still at a substantial discount to Thai and Vietnamese prices, the rains have narrowed the country's peak selling window between September-December ahead of the full weight of Asian main crop arrivals between December-March.

Pakistani 5% broken white rice was assessed at $427/mt FOB Aug. 21, up by $4/mt on the week, S&P Global Platts data showed.

As such, many exporters may increasingly feel the pressure to lower their offers and sell before competition in Asia heats up in the coming months, sources said.