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Rice Is King In West and Central Africa

Outside of Asia, rice is as big a part of diets in west and central Africa as in any region of the world. Though cultivated for over 2,000 years in the Niger River floodplains, local rice production decades ago ceased to keep pace with the rapidly increasing consumption of burgeoning urban populations. Consequently, the 20 or so mostly coastal countries extending from arid and sparsely populated Mauritania to lushly forested Congo and anchored by regional giant Nigeria now account for more than a quarter of global rice trade.

Roughly 12 million tonnes gets imported, complementing local output approaching the same amount.

Collectively, and in most cases individually, the countries of the vast region have sufficient arable land and water resources to be self-sufficient and even generate large surpluses for export. Consequently, the majority of governments have adopted policies to speed the transition from subsistence rice farming to commercial production. However creation of a value chain that can competitively supply domestic rice to city dwellers accustomed to high quality, low cost, attractively packaged imported products is fraught with challenges.

flatbed-truck-parboiled-rice

A flatbed truck hauls 30 tonnes of parboiled rice in 50 kg bags out of the Port of Conakry in Guinea after being loaded directly from a break bulk vessel carrying 20,000 tonnes. Photos by David McKee.

One of the biggest is how to attract long-term investment in farming, in land storage and processing from food companies who are accustomed to less risky, short-term trading.

In a number of the larger countries, some success is already notable with domestic production expanding while imports level off or even decline.

The picture is highly variegated from country to country and even within them.

NIGERIA AND BENIN

Nigeria’s 180 million people are estimated to consume nearly 6 million tonnes of rice per year. Just over half, or about 3.1 million tonnes, is imported despite a tariff of 70%.

In practice, very little of the foreign rice is subject to such a high duty. According to International Grains Council data, over half of imports in 2015 entered from neighboring Benin where the duty on rice is only 12%. Most of Benin’s rice imports, up to 30,000 truckloads per year, are routed via transit shipments through Niger to the northwest of Nigeria.

Since Nigeria consumes parboiled rice exclusively, but Benin prefers white rice, it is easy to deduce that the 85% share of Benin imports that are parboiled are bound for Nigeria through the orchestrations of clever traders.

Nigeria’s overseas rice purchases are highly concentrated among just a few major trading houses. According to one top importer, about 60% comes in bulk vessels from the three largest rice re-processors in Thailand with bagging at the Nigerian ports. The remaining 40% is vessel loads of break bulk bagged rice originating in southeastern or northwestern India.

Starting a few years ago, the Nigerian government has allowed these companies to pay only 30% import duty if they invest in domestic milling capacity. As a result, the small group of companies that accounts for most imports also owns a major share of the modern milling capacity.

The challenge that they and other value chain investors now face is procuring or producing enough rice to keep these mills operating.

The Rice Processors Association of Nigeria has 22 member companies who lobby the government to maintain import duties and rein in illegal shipments from Benin.

Stallion Group, a pan-African trading house headquartered in Dubai, is Nigeria’s largest rice – and automobile– importer. Amit Rai, Stallion’s chief of domestic rice operations, reports the company has also made the largest investment in domestic rice milling with capacity of 430,000 tonnes per year in three locations. The company is buying from 300 rice cooperatives and another 8,000 to 9,000 farmers spread across 14 of Nigeria’s 36 states. Rice is grown in around 23 of them. Rai says the company is targeting 1.5 million tonnes of domestic rice milling capacity. Stallion Group is present in rice – and automobiles – in a number of West Africa countries, particularly Ghana.

MALI

Thanks to a sustained effort dating back the 1980s to develop land along the Niger River for irrigated cultivation, Mali has made the most progress of any country in West Africa toward self-sufficiency in rice.

Farmers now grow 1.4 million tonnes, mostly in the zone a few hundred kilometers west of Bamako, known as Office du Niger. Annual imports have declined to only 100,000 tonnes according to USDA estimates.

City dwellers now mainly consume local rice varieties that are preferred for their freshness and aroma.

Industry and government officials frequently state that the network of canals could be extended to increase irrigated rice area by several times to 1 million hectares. Double cropping and yield in-
creases thanks to new varieties and better fertilizer application could turn the country into a large surplus producer by the end of the decade with exports flowing from the landlocked country to its neighbors on three sides.

SENEGAL

Low-cost bulk shiploads of 100% and 50% broken rice from Brazil and Uruguay make up about three quarters of Senegal’s annual imports of 1.4 million tonnes. About 100,000 tonnes is re-exported. Large-scale irrigation schemes in the Senegal River valley shared with Mauritania on the northern bank have allowed national production to gain ground.

Average farm size is small at just one to two hectares but mechanized service providers help raise productivity through tractor tilling and combine harvesting for a fee.

Policy makers in Senegal have struggled to overcome the dichotomy of low cost, good quality foreign rice exclusively for urban consumers and poor quality, higher cost, domestic rice consigned to rural households.

Private sector investment in a number of modern mills in the northern rice production zone means that well-cleaned, sorted and graded domestic rice is now available, but production costs remain much higher than in major export origins.

In place of elevated import duties that only resulted in high volumes of smuggling via Gambia, the government is now requiring the 10 largest licensed rice importers to purchase the surplus domestic production based on their share of imports. If a company accounts for 10% of imports, it must buy 10% of the commercially available local rice at government-dictated prices for inclusion in their distribution channels.

There is a second rice production zone in the southwestern Casamence region of Senegal sandwiched between Gambia and Guinea Bissau. As in the neighboring countries, paddies are carved out of mangrove swamps and long-handled wooden hoes are used to laboriously turn the earth in a subsistence farm economy with little mechanization.

IVORY COAST

Cote d’Ivoire’s success as one of the world’s leading exporters of cashews and cocoa has retarded its development as a rice producer despite optimal growing conditions for the cereal. Subsistence farming of rice is widely practiced in all corners of the country but for cash crops, farmers prefer the more lucrative cultivation of export commodities.

A handful of major food companies import 1 million tonnes of mostly high quality rice from a wide range of origins for the sophisticated consumers of Abidjan. Long grain Thai and Vietnamese varieties are preferred with perfumed rice gaining share.

Since 2012, the Ivorian government has been engaging in a state planning exercise in order to bolster domestic production. The country has been divided into 10 zones that are being grant-
ed as concessions to private operators. These include the largest rice importers as well as some foreign investors. Each concessionaire will have a semi-exclusive right to install industrial rice mills in its zone and procure from local farmers. Currently there is only one large industrial mill operating.

The Ministry of Agriculture’s ONDR is also reportedly managing a scheme to import 30 rice mills from India with financing from India’s Ex-Im Bank. Private sector players complain that excessive intervention creates uncertainty in the sector that hinders them from going ahead with investment plans.

GHANA

In neighboring English-speaking Ghana, where the business environment is much more laisser-faire, one domestic business group, Avnash Industries Ghana Ltd., is now building one of the largest industrial rice mills on the continent. The Bühler-equipped mill located in the center of the country will have capacity of 500 tonnes paddy per day. The company is also launching a palm oil refinery in the Port of Tema.

The challenge, according to rice mill general manager Sheeva Avnash, will be to secure enough local rice to keep the mill turning.

Timing for the venture may be good, given the 40% devaluation of the Ghanaian currency that accompanied the crash in petroleum prices. Some importers took big FX-related losses and incoming volumes have dropped by 30% year on year. Locally grown product should make inroads in urban markets.

Ghana is another country where parboiled rice is important. It is the only place in West Africa where U.S. rice is eaten, but the major importers report that low global prices could mean no shipment from the Gulf of Mexico in the coming year.

Singapore-based Olam is one of the leading importers.

GUINEA, SIERRA LEONE AND LIBERIA

The three countries struck by the Ebola pandemic in late 2014 faced some risk of food shortages when ships carrying rice refused to discharge in their ports. Unaffected countries like Senegal were not allowing vessels that had called at countries affected by Ebola to pull into Dakar. Disruption in local transport of food compounded the problem even further.

In Liberia, where annual rice imports total 300,000 tonnes and local production is just 200,000 tonnes, the largest importer fortunately had 55,000 tonnes on hand at port warehouses when supply stopped. Stocks dipped to 11,000 tonnes, less than two weeks of import supply for the country of 4.5 million, before rice vessels began calling again. In all three of the water-abundant countries, rice is one of the main cereal crops grown by smallholders. Very little of their harvest reaches the major cities. It is either consumed by farm families or traded at the village level.

Large stocks of rice held in port warehouses by private importers are a key aspect of food security in Liberia and other countries of West Africa.

Large stocks of rice held in port warehouses by private importers are a key aspect of food security in Liberia and other countries of West Africa.

In Sierra Leone and Guinea, imports constitute less than 25% of total rice consumption. Guinea’s milled rice production of 1.2 million tonnes would only need to be expanded by one-third to eliminate the roughly 400,000 tonnes of imports and fully meet the needs of the 12 million citizens. Rural Guineans eat rice that they parboil and dry in the sun. There are almost no automated mills with parboiling and drying using husk-fueled boilers and furnaces as in India. A small coterie of private rice importers with import licenses benefit from low duties granted by government officials who fear the slightest rise in the price of a staple food could lead to mass demonstrations as happened in a number of West African countries in 2008.

GAMBIA AND GUINEA BISSAU

To give a boost to local output, Gambia’s autocratic government issued a decree in early 2015 stating that importation of rice would be banned starting in 2016. The country of less than 2 million imported 140,000 tonnes in 2014, while the domestic crop did not exceed 40,000 tonnes. Planting has been expanding at a steady but slow pace with much effort put into research and development of new varieties. The handful of companies controlling the trade say they will heed the ban but the result could be shortages, a big increase in smuggling, and a sharp spike in rice prices. The country’s only industrial rice mill, built in 2011, was never commissioned due to a fallout between the private business group and government partner in the joint venture.

In nearby Guinea Bissau, cashews are by far the largest cash crop. The principle exporters of the raw nuts are also the leading rice importers thanks to a long tradition in the former Portuguese colony of bartering rice for cashews in bush villages.

These days, the trade is more cash based, but the same companies have mostly retained control of both commodities. Like Senegal, the two small countries get the largest share of their rice from South America in 100% or 50% broken form arriving in bulk vessels and bagged at dockside during discharge. LD Commodities dominates the supply from South America to these countries and others in West Africa.

Original PDF article as appeared in the World Grain magazine.

Going from margin to mainstream

Rice importation and production have been on the rise in eastern and southern Africa.

As a cereal crop and staple food, the place of rice has rapidly shifted in many countries of eastern and southern Africa from the margin to the mainstream. Both importation and local production of rice have been on the rise.

In rapidly developing Mozambique, high quality rice is now the preferred grain of the burgeoning urban middle class. Colorfully packaged Thai varieties occupy entire aisles of shelf space in gleaming new supermarkets of Maputo, Beira and Nampula, while maize meal dominates only in public markets.

Foreign firms, sometimes backed by their governments, have acquired vast tracts of farmland for creation of rice plantations. China and Vietnam are reported to each have 100,000-hectare grants in southern Mozambique.

rice-harvesting-kpl-tanzania

Rice harvesting at Agrica’s KPL farm in Tanzania’s Kilombero Valley 450 km from Dar es Salaam. Photo courtesy of Carter Coleman.

Among the geographically and culturally diverse countries from Khartoum to Cape Town, the two top rice producing countries are Madagascar and Tanzania with 2.5 million tonnes and 1.4 million tonnes, respectively.

The top importing country is easily South Africa with 1.1 million tonnes, thanks to its big economy and large numbers of urban consumers. Three other aspiring middle-income countries each buy about 500,000 tonnes per year from outside: Mozambique, Kenya and Angola.

In all of sub-Saharan Africa, only economic giant Nigeria tops Madagascar as a producer and South Africa as an importer. A few national and sub-regional snapshots serve to illustrate the enormous variety of the rice industry in this half of sub-Saharan Africa

MADAGASCAR

Among African countries, rice plays the biggest dietary and economic role in the giant Indian Ocean island where the 23 million people consume about 300 grams daily per capita.

Milled rice production of around 2.6 million tonnes is on a par with Nigeria and accounts for nearly 20% of all rice grown south of the Sahara. Imports of around 300,000 tonnes per year ensure variety and high quality packaged rice to city dwellers while cheaper varieties and grades help keep a lid on prices. Poor farmers grow the crop as much for subsistence as for cash.

MOZAMBIQUE

In an interview with World Grain, a top manager of a leading Mozambican food importer stated that rice imports have been increasing on a year-to-year basis by 5% to 7%. Maputo accounts for 60% of the country’s total rice imports, he estimated. The rising middle class overwhelmingly prefers rice to maize meal.

Large importers bring rice in 25-kg and 50-kg bags in break bulk vessels saving $7 or $8 per tonne over containerized shipments. Vessels sizes are mostly 5,000 to 15,000 tonnes but sometimes 30,000 tonnes.

“New players are coming into the trade. Traditional wholesalers have begun their own imports in containers with their own brands,” the industry insider added. “More and more traders are now getting into rice imports.”

He estimates there are more than 50 importers now, but the top five still have a 50% market share.

KPL has a 500 kW biomass gasification plant powering 600 tonnes per day capacity silo dryers. The six MFS/Stormor silos have a total of 4,800 tonnes storage capacity. Photo courtesy of Murray Dempsey

KPL has a 500 kW biomass gasification plant powering 600 tonnes per day capacity silo dryers. The six MFS/Stormor silos have a total of 4,800 tonnes storage capacity. Photo courtesy of Murray Dempsey

In Maputo, 80% of the imported rice is from Thailand. It is almost all 5% broken, but just 10 to 15 years ago the standard grade was 25% broken, before shifting to 15% broken.

In the less prosperous center and north, the standard is still 15% broken. The share of 25% broken is now very small. There is also more Pakistan and Indian origin rice in the Beira and Nacala corridors. Basmati rice is a small but growing share of the market.

Local rice is a sweet, long grain. Production is increasing in the rain-fed southern zone where it does well and now accounts for about one third of total consumption that stands at 750,000 tonnes. Some high quality domestic rice is also available in Maputo supermarkets from various rice millers in the south.

TANZANIA

“In a good year, Tanzania is self-sufficient in rice production,” said Carter Coleman, CEO of U.K.-based Agrica Ltd, operator of a large commercial rice farm in Tanzania. He maintains that exports to neighboring Uganda, Rwanda and Burundi, all members of the EAC as well as to eastern and southern DRC, can exceed volumes of low-cost rice coming in from Asia.

Much of the incoming rice is smuggled via Zanzibar. The Tanzanian island has a special status in the EAC and is allowed to impose only a 12% duty on rice. Four or five companies bring rice legally to the island where it is rebagged and transported along the coast to small “pirate” or “dhow” ports as the local media calls them. Official data have shown Zanzibar with by far the largest per capita rice consumption in the world.

Coleman, who is also vice-chairman of the Rice Council of Tanzania, thinks that the 75% EAC import duty will be needed for some time. The Rice Council has issued a position paper that says East Africa is decades away from competing with Asian exporters of rice on a cost basis.

“Farming is rocket science and farming in Africa is like farming on Mars. You must be totally self-sufficient. You need 1.5 times the number of tractors and combines because parts are not readily available.”

Rice production in Tanzania is in four main zones including the Tsonga River Valley in the south and Arusha/Moshi area near Mount Kilimanjaro in the north.

Production is a mixture of corporate farms and smallholders. ETG’s Kapunga farm with 3,000 hectares irrigated via a 12-km canal from the Ruaha River near the Malawi border is one of the largest. It was a Japanese government project in the 1970s and was only privatized eight years ago.

Coleman remains optimistic about better government control over smuggling thanks in part to the media campaign of the Rice Council supported by its 350,000 smallholder members. Agrica’s Tanzanian farm has plans to install center pivots to increase irrigated area from 1,445 hectares to 3,037 hectares with cropping during both the rainy and dry seasons.

Small farmers have been benefiting from introduction of new varieties and better agronomic practices. In the past, rice was sown by broadcasting. Now more transplanting is being introduced. New varieties include hybrids and aromatic varieties related to basmati.

OTHER EAC

Elsewhere in the Great Lakes Region, rice has a long history as a cash crop in certain well defined areas with irrigation schemes such as the Ruzizi Plain between Lake Kivu and Lake Tangayika, straddling Burundi and South Kivu province of the Democratic Republic of Congo (DRC) as well as in Uganda on the flood plain below Mount Elgon near the southeastern border with Kenya.

Internationally funded projects carried out decades ago built dams and canals and leveled land in these areas and the local population was introduced to rice cultivation.

Indian rice producer Tilde has invested in rice farming and milling in Uganda, focusing on the basmati varieties it is known for.

In Rwanda, there has been a recent push to carve rice paddies out of the bottom of narrow river valleys throughout the country, but yields in some rain-fed highland areas can reach six tonnes per hectare.

A multitude of donors have funded projects to introduce improved seed varieties, fertilizers, mechanized farming implements, and better drying and storage facilities. The results are often mixed but progress has been made. In Bukavu, the largest city in South Kivu, the Heineken-owned Bralima brewery sources locally from the Ruzizi Plain nearly all of its rice used as an adjunct. It was still importing rice from Asia several years ago and its need has increased as beer consumption has risen sharply. In remoter parts of DRC, such as the interior of South Kivu province, rice is an important rain-fed, subsistence crop that is hand sown, manually harvested and husked. Yields rarely exceed one tonne per hectare. Kenya’s rice imports are large because it has negotiated an exemption to the EAC common external tariff that allows Pakistan rice to come in with a 35% duty in reciprocity for special treatment of Kenya’s tea exports to Pakistan.

SOUTHERN AFRICA

In South Africa, imported rice consumption mainly by middle and highincome groups in large cities has more than doubled to 1.1 million tonnes from 523,000 tonnes in 2000. Diversified food majors like Tiger Foods import and package rice under their house brands. Still, the per capita consumption figure is low among the 55-million population as maize meal remains the main staple among most groups.

The pattern is similar in other large countries like Zimbabwe and Zambia.

Oil rich, highly urbanized and food import dependent Angola has seen foreign rice consumption increase by a factor of seven in a span of 10 years from 65,000 tonnes to 450,000 tonnes.

HORN OF AFRICA

Imported rice and pasta are traditional food staples accompanying a semi-nomadic herding and trading way of life in Somalia as well as ethnically Somali Djibouti and the eastern Somali Region of Ethiopia. Smuggling is rampant so reliable import numbers are hard to come by. In Djibouti, trade data showing 120,000 tonnes of imports indicates consumption of over 120 grams per capita daily.

Rice production is a relatively new phenomenon in Ethiopia, where cereals cultivation is an ancient practice, but is starting to take hold. Planted area has increased by several times since 2005 and government is forecasting a 140,000 tonne crop for 2014-15. Foreign investors have been granted large tracts of untitled land in the water-rich tribal lowlands of the southwest to be converted to major rice plantations through costly investments in land preparation.

On the highland plain around Lake Tana, the source of the Blue Nile, in the last decade farmers have increasingly learned to take advantage of annual flooding during the summer monsoon season by sowing rice instead of seeing traditional grain crops drowned.

Gradually, local rice is becoming a part of the urban diet in Addis Ababa and regional centers, just as it is increasing its “share of stomach” in almost all large cities of Africa.

Original PDF article as appeared in the World Grain magazine.

Bangladesh – road to self-sufficiency

Once heavily dependent on international assistance, Bangladesh is now in position to help other countries with rice exports.

At a traditional husking mill parboiled paddy rice is pushed into piles and covered with cones in the drying yard in the evening before being spread under the sun again the next morning. Scores of village woman perform these tasks at each mill. The smokestacks of the boilers of other husking mills are in the background.

When Bangladesh won its independence from Pakistan in 1971, its prospects for development were viewed dimly by many in the global community. A severe famine in 1974 reinforced its unfortunate image as a destitute country. A long period of socialist policies that began to be reversed only in 1988 did little to lower poverty rates.

Thanks in part to gradual market-based reforms and heavy doses of international assistance, but mainly owing to the initiative of the Bangladeshi people, the country can now boast of many accomplishments on the road to economic self-sufficiency.

  • At $20 billion per year, it is the world’s number two garment exporter after China.
  • Numerous other export sectors from pharmaceuticals to plastics to ship building are on the verge of taking off.
  • About 8 million overseas workers send home over $1 billion per month in remittances.
  • Population growth is well under control as fertility rates have dropped from 6.9 children in the 1970s to less than three per woman.
  • Micro-lending, a phenomenon that was first successful on a large scale in Bangladesh, has improved countless livelihoods in rural society.

Food security successes

The above notwithstanding, advancement in food security is one of the biggest feathers in the nation’s collective cap, particularly given population density, the highest of any large country (160 million people in an area the size of Iowa or Greece), lack of natural resources and vulnerability to more and more frequent climate change-related natural disasters like drought, cyclones and flooding.

Workers gather up and fill jute bags with parboiled paddy (rough) rice after drying for milling at a husking mill. New automatic mills now accounting for over 20% of production eliminate these labor intensive steps.

With 33.5 million tonnes of milled rice production from three annual crops, Bangladesh has maintained self-sufficiency in rice production. Twenty years ago production levels were less than half this amount. Population has increased by 40% to 50% in the same period such that per capita food availability and intake has increased significantly.

Like other countries in the region, ranging from India to Myanmar to Thailand to Vietnam, today policy makers in Bangladesh fret more about the risks inherent in surplus rice production and the need to help farmers make ends meet. Wholesale prices of milled rice have declined by 30% since October 2011. Retail prices have fallen more slowly but are now about 25¢ to 30¢ per kg for the most common varieties.

If farmers begin major plantings of other crops in place of rice, reduced area and sudden drought could bring a crop shortfall and domestic price spikes. Some Bangladeshi politicians have even suggested allowing large-scale exports of common varieties for the first time to raise domestic prices closer to international levels and boost incomes of rice growers.

Bangladesh ranks fourth in rice production and consumption after China, India and Indonesia, so any radical policy moves could impact world markets.

Limited government role

In the past, the government has imported rice to make up for perceived shortfalls in domestic supply. In the 2010-11 marketing year (May-June), a record 1.3 million tonnes of imported rice filled Food Department warehouses, with the inward flow slowing to 445,000 tonnes the following year. This constituted a sudden policy shift, as the next largest year for government rice imports was 477,000 tonnes in 1996-97.

Successive bumper crops occurred in the last two years as the import contracts were executed reducing the government’s ability to make domestic purchases and boost the slumping rice market.

These activities aside, the direct role played by the government in the rice sector is relatively small compared to other rice dependent countries. Procurement for public food distribution schemes in most years ranges from 1 million to 1.5 million tonnes. This amounts to just 3% to 5% of total production.

By comparison, Indian federal and state government agencies procure about one-third of all rice production, and Thailand’s government is seeking approval to buy 19 million tonnes, or nearly two-thirds of annual rice production next year to support farmer incomes. Bangladesh government rice stocks are about 1.5 million tonnes versus 12 to 13 million tonnes in Thailand as of September 2012 and 25 million tonnes in India.

Farm investment

It can be argued that public sector withdrawal from the rice market is largely what triggered the surge of investment in production and milling capacity. Up until the early 1990s, the government exercised monopoly powers over the rice market as the sole buyer of surplus from commercial mills in an attempt to control both producer and consumer prices. Such a policy was a disincentive for private sector risk-taking to invest in production and processing of the key food staple accounting for over 60% of caloric intake.

Since the late 1990s there has been a huge shift in the zone of surplus rice production from southern areas during the wet monsoon Aman season to the northeastern districts during the dry winter months of the Boro crop. Investment by farmers in over 200,000 electrically driven irrigation pumps and tube wells is at the base of this transition.

For the sake of greater food security, the pumps run without interruption in the hot dry months of April and May, even while Dhaka’s residents suffer repeated daily power cuts, euphemistically known as “load-shedding,” due to the country’s chronic under-supply of electricity.

The Boro crop now accounts for 60% of annual production, diminishing the Aman season share to 30%. Increased imports, production and distribution of subsidized mineral fertilizers by a government monopoly also have boosted output.

Milling investment

As production has expanded, the efficiency of the rice milling sector has gained through the construction of
hundreds of automatic rice mills in the last 15 years. Ninety percent of rice is parboiled in Bangladesh. There are just a few small, peripheral, hilly regions where raw white rice is preferred.

“Auto mills” soak, steam and dry the paddy in a continuous automated process before milling, polishing and color sorting.

Traditional “husking mills” in Bangladesh soak the paddy in open outdoor vats before a few minutes of steaming or boiling followed by labor-intensive spreading and turning of the wet grain in a concrete yard to dry under the sun. Such mills still number from 10,000 to 20,000. Capacity of most is just 1 or 2 tph.

Industry insiders estimate that already over 20% of all rice in Bangladesh is processed by “auto mills.” The largest numbers are found in clusters in the surplus zones of the north Bengal region. For example, around Dinajpur there may be 100 such auto mills built just in the last five years. Capacity ranges from 2 to 14
tph.

Most milling and parboiling equipment is imported from neighboring India. However, many of the major mills ranging from 8 to 14 tph, are now being built with state-of-the-art equipment from the most well-known international manufacturers.

These mills compete to sell their brands to urban consumers throughout the country but primarily in greater Dhaka, a rapidly expanding urban conglomeration of 15 million where purchasing power is highest. Color sorters are a key piece of equipment for the new generation of mills in Bangladesh as middle-class buyers happily pay a premium for the product with fewest impurities.

Fine rice and Miniket

While the food security policy emphasis has been on getting increased yields of common varieties of rice, there has been a pronounced shift in market demand to fine varieties, many of them similar to the aromatic jasmine and basmati varieties of Thailand and India. These varieties now make up about 15% of production but command a much higher price due to lower yields and high demand.

Responding to the market, innovative owners of auto mills have come up with their own fabricated version of fine rice, locally known as “miniket”. Low price coarse varieties are ground down in a final step in the milling process to make the kernels thinner and appear longer, giving them the visual appeal of fine rice. From 5% to 10% of the milled kernel is removed as flour in the process, which is sold for extrusion of rice noodles or for chicken feed.

One 2011 study estimates the miniket sales at an annual 5.4 million tonnes, nearly 20% of total domestic consumption, and still gaining market share. Miniket commands a price about onethird higher than the coarse varieties from which it is ground, so the incentives for millers are clear. True fine varieties on the other hand sell for about three times the retail price of coarse rice and twice the price of miniket. Miniket
allows aspiring housewives to serve up rice having the appearance of expensive fine rice but with the flavor Bangladesh is are accustomed to from childhood.

Further investment

Entrepreneurial rice millers are beginning to explore opportunities in production of rice bran oil. One major miller with such plans estimates that 150 truckloads of rice bran are taken daily to India, even though Bangladesh imports up to 1 million tonnes of vegetable oil per year. Reportedly, four rice bran oil plants have been started up in recent years and many more are likely to follow.

Today, farmers dry paddy themselves in order to store it on farm and to sell to millers at 14% moisture content. As farm economics change due to higher labor rates, it will be attractive for farmers to sell wet paddy to large millers with big, efficient dryers. Already a few are exploring investment in large paddy drying centers auto fueled by rice husk furnaces consuming only a fraction of the husks from milling.

Wheat rising

Per capita rice consumption may have already peaked as rising incomes allow for dietary diversification to wheat-based products, particularly for the burgeoning urban population. Large food groups with highly-efficient procurement, logistics and processing operations now account for two-thirds to three-quarters of wheat imports. Bushandhara Group has recently completed one of South Asia’s largest wheat mills at 1,200 tonnes per day and 60,000 tonnes of steel silo storage. It awaits only an electrical hook up from the government to start up. At the same time, truckloads of wheat arriving from India in cross-border trade assure adequate wheat supply to dozens of smaller wheat millers spread throughout the country.

Because of its lower cost compared to rice, the government usually favors wheat imports for distribution to the poor under a myriad of food welfare schemes.

Domestic wheat production has decreased from a peak of almost 2 million tonnes to 1 million as farmers plant maize instead to supply feed production for an increasingly industrialized poultry sector and growth in aquaculture. More protein intake in the form of chicken and fish has contributed to major reductions in the rate of childhood stunting.

Conclusion

With rice consumption soon peaking but rice yields still rising by over 3% annually, Bangladesh has the potential to add millions of tonnes to the international market within a five-year period if the export gate is opened and farm prices are allowed to climb.

Ironically in the process, once chronically food insecure Bangladesh would thereby help stabilize world rice prices and contribute to the food security of sub-Saharan African countries for which low-price imported rice can be a safety valve.

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India gaining infuence in rice market

A view inside Dunar Food’s hygienic plant in Haryana state just north of New Delhi.

After China, India is the number two rice-producing and consuming nation. Record crops the last two years means total annual supply of 108 million rice equivalent is much in excess of domestic demand. Government planners are less concerned now with how to maintain an adequate emergency reserve in case of consecutive failures of the annual monsoon rains than with how to store and dispose of the burgeoning surplus.

Dunar Foods large mill near Karnal, Haryana state, India — one of three in different states — sits among wheat fields that will be replanted with rice during the summer monsoon season. Photos courtesy of David McKee.

One belated response has been the removal in September 2011 of the export ban on non-basmati rice. According to an IGC report, currently India is on track to increase overall exports 6.1 million tonnes this marketing year, up 50% from 4.1 tonnes last year.

If the trend continues, which seems likely given the high level of stocks and continued production increases, India could soon become the world's leading supplier of rice to world markets, overtaking second-ranked Vietnam and usurping Thailand from the number one position that it has held for decades. Rice millers and exporters in all corners of India have been gearing up production to take advantage of the new external market openings. Vijay Setia, president of the All-India Rice Exporters Association, estimates that there are 1,000 rice millers producing for export. The majority of mills may sell through traders and brokers. But the largest exporters are the biggest rice millers. Those that receive major foreign orders often subcontract production to numerous small neighboring mills.

Suresh Sundaresan, executive director of the same association, estimates that as much as 16% of the current crop could be available for export even while ensuring buffer stock norms of 33% of annual use. But the government must be flexible in reducing its minimum export price to speed the outward flow, he says.

A view inside Dunar Food’s hygienic plant in Haryana state just north of New Delhi.

A view inside Dunar Food’s hygienic plant in Haryana state just north of New Delhi.

India's rice exports cover the entire spectrum of varieties, processing and quality grades, from high-priced, store-branded basmati varieties, both parboiled and raw, for wealthy markets like the Gulf countries of the Middle East, North America and Europe, to certain grades of broken rice for West African countries, to common varieties of raw rice for government food organizations like Bulog in Indonesia.

Rice Mosaic

This  diversity  is  a  reflection of the variegated picture of rice production and milling in India. The major differences are between north and south. The biggest surpluses are produced in Punjab and Haryana in the shadow of the Himalayas, where the superb irrigation infrastructure, sophisticated commercial farmers, and high government prices combine to make rice a mono-culture during the Kharif season from April to autumn when it alternates with the other mono-culture, wheat, in the dry Rabi season.

Haryana and Punjab produce an annual crop of around 15 million tonnes. Nearly all of it is marketable surplus as the people of the region traditionally consume just a few meals of rice per week. The Food Corporation (FCI), a federal agency that operates the central grain pool, takes the bulk of the surplus.

FCI pays the Minimum Support Price to farmers for common varieties purchased by a number of state level organizations from the mandi system of agricultural markets. The paddy is delivered to rice mills, about 700 in Haryana and 3,300 in Punjab, on a quota system during the harvest in September.

The mills are expected to complete milling of the rice by March 31 for delivery to government warehouses and eventual shipment  to  rice deficit states, mainly in the south.

Nine out of 10 rice mills in both states are doing only custom milling for the government and have an average capacity of less than 2 tonnes per hour. Only 300 of Punjab's rice millers buy their own paddy to produce for the open market in addition to government business. Just a handful of the largest millers completely forgo custom milling for the government.

One state where rice milling has become relatively consolidated is Andhra Pradesh in the south, where just 600 mills produce over 14 million tonnes, the second most of any Indian state after 15 million tonnes in West Bengal. The government's share of the market is less important there, so fewer small mills are surviving only through custom milling for the state. To suit local tastes almost all rice is parboiled, a more capital intensive process. Both of these factors may help to explain why clusters of bigger milling enterprises have developed in major production zones.

Basmati Rice

A new sector of large modern automated rice mills has emerged in the north that have based their growth on the surging demand for higher-value, attractively packaged, specialty varieties both in export markets and domestically.

Dinesh Chhatra, general manager who heads up Adani Wilmar's recent entry into branded rice sales, estimates that half the rice milling in the two northern states occurs in relatively large-scale enterprises processing 24 tonnes of paddy (rough) rice per hour and more. In the southern states, where rice is the most important staple, he says just 10% of all rice is milled in larger mills.

Some rice milling plants in Haryana and Punjab now count among the largest in the world with hourly processing capacity of 100 to 200 tonnes. They have sophisticated milling technology and other processes to extract maximum value by producing an array of high-value byproducts such as rice germ and rice bran oil.

LT Foods, KRBL, REI Agri, Kohinoor Foods and Lakshmi Food and Energy all rank among the largest rice processors and exporters. The key to growth of most of these is exportation of several varieties of tne long-grained, aromatic basmati rice to dozens of countries in all regions of the world.

Dunar Basmati rice packaging

Sophisticated packaging is one aspect of marketing strategies for Middle Eastern countries that take a big share of India’s high value basmati exports.

Sundaresen said that in a rare show of cooperation, last year India and Pakistan settled their long-standing dispute over the use of the name "basmati," agreeing to a common geographical index for certain varieties grown in a contiguous region of the Indian subcontinent.

India has traditionally exported nearly all of the basmati it produces, simply because it commands such high prices on international markets. Few Indian consumers were willing pay for basmati multiple times the cost of the common varieties they were accustomed to since childhood. But now basmati rice and branded rice in general have seen a tremendous surge in domestic consumption thanks to higher incomes accompanying economic growth.

KRBL Ltd. is one major rice miller that has exploited this trend. Anil Mittal, chairman and managing director of the company, reports that 85% to 90% of production at his 130-tonne-per-hour plant is basmati rice, but that his sales are split evenly between the international and domestic markets where KRBL has built one of the country's leading rice brands, India Gate, which Mittal says may be extended to rice bran oil and even whole wheat flour for chapattis.

"In 1998, only 10 percent of rice sales in India were branded, and 90 percent were unbranded," Mittal stated in a recent interview. "Now 65 to 70 percent are branded, and  in five years  rice will be 90 percent branded."

Government  Rice

This branding trend applies mainly to the 4 million tonnes of basmati rice and additional 10 million tonnes of specialty varieties that were produced last year, according to Mittal, and excludes the 30 to 32 million tonnes of rice that is purchased annually by FCI for the central pool as well as rice self-consumed by farmers.

Without government procurement, it is clear that many of India's rice milling enterprises, whose number Mittal puts at 45,000, would go out of business.

The Government of India announces an MSP every year to be paid to farmers. The price is sufficient to bolster farmers' incomes guaranteeing that enough rice is grown to ensure food security. The central pool also furnishes the bulk of the heavily subsidized common varieties that are provided as either raw rice or parboiled rice to the 25% of families in most Indian states that hold ration cards under the Public Distribution System.

The FCI procures rice at 18 rupees ($0.38) per kg but sells it to the state governments for just six rupees per kg. The states, at their own discretion, may increase the subsidy from their own budgets. Often this happens prior to elections. In the southern state of Tamil Nadu, every ration card-holding family is now entitled monthly to 35 kg of rice for free versus a previous price of one rupee per kg.

Government subsidized rice is invariably poor quality and so a high percentage of beneficiaries, many of whom are no longer truly poor, do not bother to go to Fair Price Shops to get their rice. This opens the door to leakages from the official channels. One academic study published last year by Reetika Khera of the Indian Institute of Technology in Delhi concluded that over 40% of food grains, including rice, is illegally diverted from state run public distribution systems to open market sales. But the study also determined  this figure  is actually down about 10% from several years before.

Given the low cost and the increasing quantities being pushed through the system to reduce stockpiles, it is not surprising that there is much anecdotal evidence about old, poor quality government rice being fed to chickens by rural ration card holders or by commercial poultry farms that have purchased it on the black market.

Food security

There is little doubt that India has abundant non-basmati rice for itself and others. The challenge is for the soon-to-be top rice exporting nation to live up to its responsibility for global food security by not repeatedly closing the door on exports each time international prices suddenly spike.

At the same time, the government could do more to increase world rice stocks simply by building more and better storage, a process that is well under way.

Finally, a reduction of the state's role in the sector would allow extra room for well-run rice milling companies to create greater value in Indian agribusiness.

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