Glut, Cheap Imports Hit Rice Industry

Large shipments of rice as humanitarian aid, cheap imports from China and a continuing two-year glut on the world market have undermined the country's rice producers, analysts and market participants say.

Last year, according to the International Club of Grain Companies, the United States and the European Union shipped 150,000 tons of rice to Russia in the form of humanitarian aid. Growing world harvests and quasi-legal Chinese imports across the Far East border have also contributed to the problem.

The executive director of the International Club of Grain Companies, Maria Baranova, said Wednesday that record world rice production has forced the market to make monthly price cuts over the past two years.

Ella Tinayeva, sales director of the Astrakhan Grain Plant, located in Southern Russia, said her plant has been forced to severely cut production from its usual 90,000 tons to only 10,000 tons for this season. She predicted the plant will still lose money in spite of the sharp cuts because rice is selling below cost.

According to figures from the International Club of Grain Companies, rice is selling at an average price of $265 per ton, while production costs range from $290 to $300 per ton. Rice produced in Krasnodar, Southern Russia, is selling for under 9 rubles (32 cents) per kilogram, far below production costs of around 14 rubles per kilogram.

Igor Pushkarny, commercial director of the Krasnodar region's Angelsk grain plant, said this year his company has lost regular customers in many cities, including Voronezh, Lipetsk, located in Central Russia, and Volgograd, Southern Russia.

Besides domestic producers, large importers of grain have also been hurt by the situation on the market.

Representatives of Shtern Impex, which sells Indian rice, said their company has already lost tens of thousands of dollars this year. Chinese rice as a rule is retailing for 7 rubles per kilogram. At a cost price of 10 rubles per kilogram, wholesale prices on Indian rice have been forced down to 8 rubles per kilogram, they said.

The Angstrem Trade company has decided to cut its rice shipments to the local market and limit its imports to rice for packaged products.

"Our company used to do 2,500 tons of packaged rice, and the same amount of bagged rice per month," said Angstrem Trade vice president Viktor Kozyrev. "But for the last while, we've been selling only packaged rice, although at 3,000 tons a month."

Kozyrev said name-brand rice has not been affected by the situation on the market. He reported that wholesale prices on his company's Angstrem rice has remained stable at 40 cents to 50 cents per 900-gram package.

Angstrem representatives said they expect rice inventories to be depleted soon, which will lead to rising prices.

However, representatives of Moscow's Mistral company are less optimistic. "There's no point in waiting for the situation to improve," said Mistral director Oleg Yershov. "Deliveries of cheap, low-quality rice from China will continue, and humanitarian aid from the United States is also possible."

Mistral has also ceased its bagged rice sales.

According to analysts from the International Sugar Company, which compiles information for sugar and rice market participants, the local market consumes 500,000 tons of rice per year.

The Russian Statistics Agency reported that 444,000 tons of rice were produced domestically in 1999. The State Customs Committee said last year's imports of 550,000 tons of rice tripled 1998's imports.

The committee said 175,000 tons of rice were imported from China, while 150,000 tons came from India.

The Comcon market research agency reports that 89.6 percent of the nation's households consume rice.