With global food prices slumping to six-year lows in March due to bumper production and high inventory levels, Indian agri-exports are likely to face a setback. Most agri-commodities are currently trading below Indian minimum support price (MSP) in the global markets.
“Most commodities in global markets are trading below the prevailing MSP in India. This will translate to at least 10% lower exports of agri commodities from India in 2015-16 from the current estimated level of $32 billion including agri commodities and plantation products,” said Ajay Sahai, Director General, Federation of Indian Export Organisation (FIEO).
While India’s agri commodity exports would be lower, import bill for commodities like vegetable oil and pulses will also be subdued.
Data compiled by the Food and Agriculture Organisation (FAO) of the United Nations showed the world food price index continued to drop in March, down 18.7% (40 points) below its level a year ago. It is also a 1% dip over February 2015. Overall, except for a pause in October 2014, global food prices have been falling steadily since April 2014, on account of large supplies.
“Fall in global prices will impact prices of agri commodities in India to the extent they are traded with global markets. Commodities like chana, wheat and rice are determined largely by domestic factors as they are less connected to global markets. Sugar, pulses and edible oils, however, will be affected. Commodities like maize will also get impacted as India exports huge quantity of maize,” said Madan Sabnavis, Chief Economist, Care Ratings.
Agri commodity prices have declined by up to 34% in the last one year. Wheat prices in global markets have plunged 34.4% to trade at $181.18 a tonne. Cotton and maize prices have also fallen by 33.24% and 31.32% to end the financial year 2014-15 at $1376.34 a tonne and $175.89 a tonne respectively. RBD palmolein and sugar posted a decline of 28.99% and 24.59% to trade at $612.50 a tonne and $357.60 a tonne respectively.
“Despite government’s assistance of Rs 4,000 a tonne on raw sugar exports, Indian mills are unable to ink purchase contracts with global buyers due to steep fall in raw sugar prices in the benchmark New York Mercantile Exchange. Sugar prices have hit seven-year lows due to over production in global markets and falling Brazilian real which makes export from Brazil more remunerative,” said Abinash Verma, Director General Indian Sugar Mills Association (ISMA).
Meanwhile, FAO has raised production and carryover stocks of cereals in March from its earlier forecast in February. Since last month, FAO has raised its 2014 world cereal production forecast by 2 million tonne to 2,544 million tonne, mainly accounting for a larger than anticipated maize harvest in the EU. At this level, global cereal output in 2014 would outstrip the 2013 record by 1%.
FAO's forecast for world cereal utilisation in 2014-15 has been raised by nearly 17 million tonne to 2,493 million tonne, and now stands at 2.6% (63 million tonnes) above the previous season's revised estimate. Thus, world cereal stocks, by the close of crop seasons ending in 2015, have been revised up sharply and now stand at 645 million tonne, 6.2% or 38 million tonne above the 2014 level.
Source:business-standard.com
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