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Tilda,
the number one Basmati brand by volume and value in the UK, warned
recently that recent Basmati price increases reflect a new market
reality with the low prices of the past unlikely to return in the
near future, and that India's imposition of a Minimum Export Price
for Basmati rice of $1,200 per tonne is contributing to higher
trading prices, according to 'The Tilda Basmati Report: 2008 Market
Outlook' published recently.
The 2006 harvest reached record
prices at auction - up 55 per cent year-on-year - but unusually there
was no correction with the 2007 crop. As a result, the wholesale cost
of Basmati has doubled in the last 12 months and concern over
supplies has pushed the EU import price of Traditional Basmati up 100
per cent. In the UK, a 20kg bag of Tilda Pure Basmati has increased
from £22 to over £30 in the past year, and 1kg packs from
£2.79 to £3.35. Further prices of the same increment will
be necessary based on the current market situation.
"Increasing global demand
and shrinking supply, combined with soaring production and
distribution costs are simultaneously conspiring to create a 'perfect
storm' of high Basmati prices, along with many food commodities,"
said R. S. Seshadri, Director of Tilda's operations in India. "Worryingly,
worldwide buffer stocks that have ensured the continuity of supply
whenever there is a shortfall from weak harvests in a given region,
have fallen to their lowest levels in decades," he continued.
"Paddy prices have
doubled in the last 18 months and these prices are now inevitably
feeding through from millers and importers on to customers in the
wholesale and retail trade and finally consumers," he continued.
Basmati has particular
challenges, different from other rice varieties including its
comparatively low yield. Traditional Basmati farmers are choosing to
grow biofuels or other types of rice which are easier to grow than
Basmati, but lack the unique cooking, aromatic and flavour properties
of Traditional Basmati. In 2007, exports from Pakistan were affected
by flooding, political instability and poor harvests, while in India
water shortages have resulted in lower yields. Costs for Basmati
farmers and exporters have also escalated with rising prices for oil,
freight and labour. The stronger Rupee has also meant that exporters
have suffered losses.
As production has fallen, so
demand has increased. In the UK, an additional 1.5 million households
have purchased Basmati in the last four years, fed by our love affair
with Indian food. Basmati now accounts for nearly half of the rice
consumed in the UK. Basmati consumption is also on the increase
across Europe, America, and the Middle East. The growing middle class
in India is also boosting demand for Basmati.
"We are monitoring
developments very carefully and sharing information with our major
customers as the situation evolves," said Jonathan Calland,
Head of External Affairs at Tilda. "We are doing everything
we can to preserve this most highly prized rice - from our extensive
research into the best techniques for growing Traditional Basmati
through to providing certified seed to farmers at cost and providing
a helpline giving free information, advice and support to farmers."
"Because Tilda works so
closely with Basmati farmers and buys direct from them, we fully
understand these price increases. When we buy our paddy, we accept
the higher prices without argument because we know that farmers have
genuinely higher costs and that high prices aren't due to
speculation. It's good news for farmers and good news for Basmati
that they are getting fair prices," he continued.
Despite challenging market
conditions, last year Tilda launched its Steamed Basmati range of 15
entirely new recipe rice products. A £3 million integrated
marketing campaign was launched to attract new quality-conscious
consumers and to help grow the category from £90 million in 2006
to £165 million in 2010. The range is specifically designed to
provide Basmati products to suit a variety of international cuisines
including Thai and Mediterranean cooking. This year, Tilda's Steamed
Pure Basmati Rice won the Grocer Branded Excellence Awards in the
rice category.
In 2008, Tilda will be supporting
its customers further by investing in a major advertising campaign in
ethnic and mainstream media to support the Tilda brand in the UK market.
The 'The Tilda Basmati Report:
2008 Market Outlook' is available to download from www.tilda.com/basmatireport2008
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