World trade in rice in 2010 is forecast to recover slightly to 30.5 million tonnes.

The
expansion would be supported by a strong import demand from Asian countries,
especially the Philippines. Purchases by Brazil and the United States could also rise,
while deliveries to African countries might diminish. The 2010 trade recovery would be
sustained by increasedexports by Thailand which look set to rebound, but also by China,
Myanmar and Viet Nam, compensating for reduced shipments from Cambodia, the
United States and Uruguay.

Global rice utilization in 2010 is projected to expand by 8 million tonnes to 454 million
tonnes, with the bulk of this volume, some 389 million tonnes, anticipated to be
consumed as food, 1.5 percent more than in 2009. As a result, per caput food
consumption is expected remain largely unchanged at 57.3 kilograms, being sustained by
government programmes that have helped dampen the effects of stubbornly high prices
across regions.

Following improved 2009 production estimates, the FAO forecast of world stocks at the
close of the marketing years ending in 2010 has been raised by 6 million tonnes to 123
million tonnes, which represents a 1 percent drop from opening levels. Much of the
contraction is expected to stem in the five major exporting countries, which, as a group,
are forecast to close the year with a 24 percent draw down to 24.5 million tonnes.
Conversely, rice importing countries, such as Indonesia and the Republic of Korea, are
expected to build their inventories. Relative to world consumption, global rice reserves
appear ample and sufficient to cover roughly 27 percent of utilization in 2010.

Notwithstanding the arrival into the market of freshly harvested supplies,international

rice prices strengthened in the last quarter of 2009, reversing a downward trend that had
been sustained since May. This was reflected in the FAO All Rice Price Index rising by
15 points to 247 points from September to December. The rebound of world quotations
mainly concerned the Indica rice market, with gains particularly evident in lower quality
varieties, which gained 49 points over the period. Prices for higher-quality Indica rice
also strengthened, while quotations for both Aromatic and Japonica varieties lost ground.
On average, rice prices in 2009 fell 42 points below their value in 2008, remaining,
however, 92 points above the 2007 average. Prospects for prices in the coming months
are uncertain, but with the major exporting countries holding less supply or imposing
export restrictions, prices are unlikely to subside before newly harvested crops reach the
market in March/April.

Factors that affect Rice Prices are as follows:

 • Weather: Role of weather in rice production is immense. Temperature,
rainfall and soil moisture are the important parameters that determine
the crop condition. Further, natural calamities can also affect crops.
Markets keep watch of these developments.
• Minimum Support Price: Changes in the minimum support prices
(MSP) by the government also have immense impact on the price of
rice.
• Government policies: Exchange rates, Fiscal policies, Export
incentives and export promotion also influence price.
• Substitute Product: Availability of substitute products at cheaper rate
may lead to weakness in demand. This situation happens especially
when the main products price tends to become higher.
• Consumption: Rice consumption depends on two factors - population
and income. Lets take for example Asia. Rice is the staple food of Asia.
Low-income groups consume more rice according to the per capita
income increase. But as the income increases, there arrives a point when
the consumption starts to dip. Income growth and reduction in
population result in a low consumption of rice.
• Seasonal cycles: Seasonal cycles are present in rice cultivation. Price
tends to be lower as harvesting progresses and produce starts coming
into the market. At the time of sowing and before harvesting price tends
to rise in view of tight supply situation.
• Demand: Import demands as well as domestic demand.
• Breakthrough in the technology may increase the productivity and
would lead to more supply. This may bring some softness in the price.

`
 Outlook future

Cyclones and higher-than-normal monsoon rains have deluged parts of Southeast

Asia this month, affecting millions in key rice- producing regions. Rice and other
crops were damaged as water levels in rivers started to fall. Thailand’s worst
flooding in five decades has spread to a third of the country.

Wet weather in Asia is hurting the harvesting of rice and coffee beans as
governments seek to bring relief to those displaced by rising waters. The flooding
adds to storms earlier this year in Pakistan and the Philippines that cut supplies.

Thailand, the world’s biggest rice exporter, may cut production from the nation’s
main crop by as much as 20 percent, likely extending a rally in prices, Thai Rice
Mills Association said two days ago. Flooding damaged 1.7 million rai (0.7 million
acres) of farmland, including 1.3 million rai of rice, according to Farm
Minister Theera Wongsamut.
Which countries produce and export the most rice?

Rice is a food staple worldwide and China is the world's leading rice producing country,
producing just over one-third (33.9%) of the world's rice supply. Thailand is the world's leading
rice exporter, however, and it's exporting 28.3% of the world's rice export. India is the world's
second largest producer and exporter.

Scope of the Rice Industry

Pakistan being an agro-based economy has natural abundance of all agricultural products
including food items. Rice is the third largest crop after wheat and cotton.
It is grown over 10% of the total cropped area. Rice is highly valued cash crop and is also
major export item. It accounts for 6.7% in value added in agriculture and 1.6% in GDP.
Pakistan grows enough high quality rice to meet both domestic demand and allow for
exports of around one million ton per annum.

Economic Importance of Rice Industry to Pakistan

Rice is the second most important crop which brings economic prosperity of the growers
as well as earns billions of rupees through its export for country. Pakistani fine rice
commonly known as Basmati is world famous and enjoys monopoly in the international
market, due to its quality characteristics, strong aroma, slender and long kernel,
gelatinization, temperature and high degree of grain elongation on cooking. However, the
grain yield of basmati rice varieties is very low. In order to remain in the International
market, we have to further improve the quality as well as yield of basmati varieties. Rice
plays a pivotal role in the agro-based and occupies a prominent position in agricultural
economy of Pakistan.

Size of the Industry

According to the latest statistics (REAP), there are 1000 members of Rice export
association of Pakistan that produce the rice for both domestic and international markets.
However there are also other factories in rural areas of Punjab, Sindh but not registered
with REAP. These factories mainly supply rice in the domestic market majority of such
companies are in Gujranwala, Sheikhupura, Larkana etc.

Major Producing Areas and Distributing Areas

• Gujranwala

• Hafizabad

• Sheikhupura
 • Sialkot

• Jhang & Okara of Punjab

• Larkana

• Jacobabad

• Shikarpur

• Badin

• Dadu

• Thatta
While Pakistan is a major producer of several key agricultural commodities, the sector continues to suffer
from major inefficiencies. Although the government has taken some important steps towards investing in and
modernising key sectors such as dairy, more investment is needed in the country's overburdened
infrastructure. For example, expansions in rice production, which could potentially become a majorexport
crop and foreign currency earner, is hindered by poor transport and power infrastructure, which are
persistent concerns in Pakistan. Unreliable irrigation and water supply also leaves crops at the mercy of the
weather. While growers can put pressure on the government to invest in infrastructure, the current volatile
political climate and sagging economy means that such investments will not be a high priority.

Wheat production for 2010 will once again fall short of the government production target of 25.0mn tonnes,
with BMI forecasting production of 23,214mn tonnes. With production having increased significantly in the
2008/09 year by 14.7% from the year before, the government hoped that a further increase would be
feasible. However, water scarcity continues to be an issue, as the 2009 monsoon brought a well-below
average level of rain, exacerbating the problem, as did a 0.22% drop in the cultivation area as compared to
2009.

Despite the persistent high prices, demand for wheat rose 1.8% in 2009 to 22.80mn tonnes, with demand
expected to increase again by 2.9% in 2010. To 2014 we forecast growth of wheat consumption of almost
6% from the 2009 level to 25.45mn tonnes. As the staple food and the cheapest source of carbohydrates,
demand for wheat is very inelastic and may even increase in times of high prices With our long-term
forecasts showing that wheat consumption will soon outpace production, Pakistan will soon find itself in the
undesirable position of being reliant on imports to meet domestic demand, and therefore vulnerable to price
fluctuations on the world markets.

For 2010 we expect that limited irrigation water and a large fall in planted area after disappointing prices for
the 2009 crop will see rice production fall sharply.

Pakistan is facing a large deficit in sugar production in 2010, and much of the blame for this can be put down
to poor business practices in the sugar milling sector.

In March 2010 Pakistani sugar mills appealed to the government for a 35% tax on imported sugar, with
worries over cheap sugar imports as a result of the significant drop in international prices.

Following their January peak, international sugar prices started to plunge, as the market began to price in a
recovery in global sugar production over 2010; this will have an impact on domestic prices and could
continue to discourage cane production. After having fallen in 2009, sugar production in Pakistan is not
expected to record a strong recovery in 2010. Output will continue to fall short of domestic demand, which
will continue to rise steadily along with the growing population.

We forecast real GDP growth to come in at a disappointing 2.4% in 2010 and 2.2% in 2011.