London, May 7 - Wholesale prices for Basmati rice, grown in the foothills of the Himalayas, are set to remain high after doubling in the last 12 months with demand surging and production costs climbing, a major importer said on Wednesday.
"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," R.S. Seshadri, Director at U.K.-based Tilda's operations in India, said in a statement.
Tilda, in a market outlook report published on Wednesday, said demand had risen as consumers in Europe, America and the Middle East developed a taste for the variety.
Indian consumers have also become more affluent and have moved to Basmati, a high value special variety which represents only a small percentage of Indian rice production.
Record oil prices have also contributed to rising costs.
"There are strong indications that these recent cost increases may well reflect a new market reality and it is unlikely that there will be a return any time soon to the low prices of the past," the report said.
Tilda said production had failed to respond.
"As demand worldwide has rocketed, production has failed to keep pace. Poor harvests combined with water shortages have resulted in lower yields," the report said.
PLANTINGS BOOST
Jonathan Calland, Tilda's head of external affairs, said, however, that the price rise would encourage plantings, which are due to begin in June.
"This year we are hopeful that with the price increase we will see a halt in the decline in basmati acreage," he told Reuters in an interview.
Rising prices for basmati and other varieties of rice have helped to stoke concern about food inflation which has posed a particular threat to poor economies and sparked widespread protests and even rioting in some developing countries.
Nearly half the world's 6.6 billion population depends on rice and demand for it is expected to grow by 50 percent by 2030, Tilda said.
Prices for other varieties of rice have risen to record highs recently after Vietnam, Egypt and Cambodia banned exports and India also introduced export restrictions.
"Banning the export of rice produces a domino effect across the world market, increasing the pressure on demand from those remaining countries whose markets are still open and causing inflation in countries reliant on imports," Seshadri said.
"The bans also prevent farmers from selling their produce at the highest price possible on international markets. This has a detrimental effect long-term because when farmers get lower prices, they grow less rice," he added.