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ONLY FOR REFERENCE BY PROJECT STAFF

Agrinews: April 2014

A compilation of major news items relating to the overall farm sector and selected

commodities covered under the study “Agricultural Outlook and Situation Analysis

Reports”

Prepared by

National Council of Applied Economic Research

11, I.P. Estate

New Delhi 110002

(Coverage from March 26, 2014 to April 25, 2014)

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CONTENTS

Section Title Page No.

1 Highlights 1

2 Broad Sectoral Trends 5

3 Agricultural Policy 9

4 Rice 13

5 Wheat 19

6 Coarse Cereals/ Maize 31

7 Pulses 33

8 Edible Oils / Oilseeds 35

9 Milk 39

10 Vegetables – Potato/ Onions 45

11 Sugarcane / Sugar 49

12 Inputs 57

13 Other Agri / Farm News 59

14 Agricultural / Food Prices 81

Note: Newspapers covered: BL= Business Line, BS = Business Standard, ET= Economic

Times, FE= Financial Express

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1

HIGHLIGHTS

Broad Sectoral Trends

India to grow at 5.5% in FY15: Ficci : The Economic Outlook Survey by the industry

chamber pegs agriculture and services sector growth in the next financial year, starting April

1, at 3.3 per cent and 7 per cent, respectively. (BS 31.3.14)

India's potential growth rate below 6%: RBI report : With growth trending below the 5%

mark for three successive quarters, the Reserve Bank today pegged economic expansion at

less than 6% from the earlier expectation of over 8%. (BS 2.4.14)

Agriculture Policy

CACP recommends options for better handling of fertiliser subsidy: The Commission for

Agricultural Costs (CACP) has recommended several options for better handling of the

fertiliser subsidy by better distribution of the subsidy and streamlining the price differences

between urea and non urea fertiliser. (BS 4.4.13)

Agriculture Ministry proposes Rs 50/quintal MSP hike in paddy, cotton & tur:

The Agriculture Ministry has proposed a moderate hike in the minimum support price (MSP)

of paddy by Rs 50 to Rs 1360/quintal for the 2014-15 crop year (July- June) and upto Rs

100/quintal raise in pulses MSP. (ET 24.4.14)

Rice

Exporters say no to large-scale field trials of GM rice : India's rice exporters have

expressed concern over allowing large-scale field trials of the crop's genetically modified

(GM) version, saying it could adversely impact its marketability abroad. (FE 10.4.14)

Bengal may see 25% higher summer rice crop : Summer rice crop in WB likely to be

higher by 25 per cent to 7.5 million tones. (BS 25.4.14)

Wheat

Export prospects set to keep wheat prices firm : Ukraine crisis opens up opportunity

abroad as millers, shippers scour for produce. (BL 4.4.13)

Global wheat output may decline to 700 MT in 2014-15: IGC : In its latest report, IGC

said global wheat output is expected to be just sufficient to meet the demand, which is

estimated to increase to 700 MT in 2014-15, from the projected 692 MT for this year. (ET

11.4.14)

Wheat procurement down 62% as rains in Punjab delay harvest : The government's

wheat procurement drive for the current marketing season (2014-15) is progressing at a slow

note because of delays in arrivals of the foodgrain across mandis in Punjab, the biggest

contributor to the central pool. (FE 22.4.14)

Wheat procurement in 2014-15 may slip, says food secretary : However, PDS won't be

hampered as govt hold 48 mn tonnes in its warehouses. (BS 23.4.14)

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Coarse Cereals / Maize

Despite long term bearishness, India can double maize exports : In a shackle-less

environment, additional shipments can be made in the short-term. (BL 25.4.14)

Pulses

Govt allows 291 tonnes of pulses export to Maldives till FY17: Although exports of pulses

are banned, the Indian government ships the commodity to the neighbouring country on

diplomatic grounds, a source said. (BS 31.3.14)

Edible Oils / Oilseeds

Groundnut oil production may touch 700k tonnes: Production of groundnut oil may cross

700,000 tonnes this year in India following a bumper output. In addition, lower export of

peanuts have diverted the crop to crushing, which has increased the oil production. (BS

16.4.14)

Milk

Ice cream makers, FMCG cos & dairy suppliers building up inventories fearing El Nino

backlash : Forecasts of El Nino are being keenly followed by all major seed, fertiliser, food

processing and FMCG companies. (ET 26.3.14)

Andhra Pradesh clocks highest growth in milk production: Assocham report : Andhra

Pradesh has recorded highest growth in terms of both milk production and per-capita milk

availability at over 41 per cent and about 36 per cent, respectively, during the five year period

of 2006-10, industry body Assocham said. (FE 22.4.14)

Vegetables – Onion/Potato

Onion prices rise about 40 per cent in a week: Unseasonal rains and hailstorms in Nashik

district have pushed up onion prices by about 40% in a week at the country's largest

wholesale onion market, the Lasalgaon Agriculture Produce Market Committee (APMC).

(ET 19.4.14)

Vegetable prices rise by 10-20% as soaring temperature spoiling the crops :

Prices of vegetables have appreciated by 10-20% in last 10 days with consumers in the north

and eastern India feeling the maximum pinch. (ET 19.4.14)

Sugarcane / Sugar

Sugar output seen jumping as subsidy boosts exports : Production may gain 5% to 25 mn

metric tons in the harvesting season starting Oct 1. (BS 28.3.14)

Sugar production dips 7% till March this year: ISMA : In the final leg of cane crushing

in the country, the sugar production in the current season is still lagging by 7% compared to

the last season. (ET 3.4.14)

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Food Ministry starts review of raw sugar subsidy amidst WTO pressure: The review is

aimed at reworking the amount of subsidy downside based on new rates of benchmarks. (BS

23.4.14)

Inputs

India's urea imports dip by 12% in 2013-14 : The country had imported 8.04 MT of urea

in the entire 2012-13 fiscal. (BS 8.4.13)

Other Agri / Farm News

Climate warming may hit India's food security system: Report : High levels of warming

resulting from continued growth in greenhouse gas emissions may hit India's food security

system with a global report warning that the impact could be "more severe" on the country'

rice and maize production. (ET 1.4.14)

El Nino to coincide with monsoon: India Meteorological Department's Pune arm warns

of poor rains: India should brace for a weak monsoon season as El Nino conditions are

likely to develop, but before rains dry up, the ongoing wet spell will continue until June,

weather scientists have forecast, casting a shadow on the rabi harvest and the planting of

summer crops such as paddy. (ET 2.4.14)

Agri exports outpace other commodities: The share in overall export basket rose to 10.66%

in 2012-13 from 7.06% in 2009-10. (BS 4.4.14)

About 40 per cent foodgrains stored unprofessionally: Assocham : About 40 per cent of

government's foodgrain is stored in an "unprofessional" way due to acute shortage of storage

capacity to the tune of 35 million tonnes, industry chamber Assocham said. (ET 9.4.14)

Govt to expand irrigation to cut reliance on monsoon : Plans are on to expand India's

farmland under irrigation by at least a tenth in the next three years, potentially boosting grains

output by an equal proportion in the world's second-biggest rice and wheat producer, a top

government official told Reuters. (BS 14.4.14)

Agri / Food Prices

Global food prices rise by 2.3 per cent March: FAO : Global food prices increased by 2.3

per cent in March from the previous month, the highest level since May 2013, as some crops

were affected due to unfavourable weather conditions, according to the United Nations food

agency FAO. (ET 4.4.14)

Costlier food items push inflation higher at 5.7% in March: Snapping the declining trend,

the inflation rose to a three month high of 5.7 per cent in March mainly due to spurt in prices

of food items like potato, onion and fruits. (FE 15.4.14)

Retail inflation rises on costlier food: Retail inflation for farm and rural labourers rose to

8.38 per cent and 8.51 per cent in March mainly on account of high prices of food items. (FE

18.4.14)

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BROAD SECTORAL TRENDS

India to grow at 5.5% in FY15: Ficci (BS 31.3.14)

Industry chamber pegs agriculture and services sector growth in the next financial year,

starting April 1, at 3% and 7% respectively

India’s economic growth is likely to pick up and reach 5.5 per cent in 2014-15 as industrial

output will recover to expand at 3.3 per cent, says Ficci.

The Economic Outlook Survey by the industry chamber pegs agriculture and services sector

growth in the next financial year, starting April 1, at 3.3 per cent and 7 per cent, respectively.

It also estimates that growth in the fourth quarter of the current fiscal will pick up marginally

to 5 per cent.

"However, this might imply that actual growth in the year 2013-14 will be slightly lower than

the growth of 4.9% projected by the Central Statistical Organization some time back," Ficci

said.

On inflation, it said that majority of the participating economists felt that going ahead both

WPI and retail inflation rates would remain range bound. Inflation based on Wholesale

Price Index (WPI) is expected to stay at about 5.5 per cent in 2014-15 and the one based on

the Consumer Price Index (CPI) will be at about 7.9 per cent, as per the survey.

On CPI becoming the new anchor for the Reserve Bank's monetary policy, the opinion was

divided. Some economists felt that it is a good indicator, while others were of the opinion that

monetary policy decision on the basis of a single parameter may not be a correct approach.

Moreover, they said that CPI is a fairly new series available only since 2011 and hence does

not adequately portray the underlying trends. Further, the median forecast for fiscal deficit

as a per cent of GDP stands at 4.4 per cent for 2014-15. This is higher than the 4.1 per cent

estimate announced in the Interim Budget last month. Subsidy burden continues to be a

bothering factor and can lead to fiscal slippages, according to the economists polled by

Ficci.

On the external sector, the survey pegs current account deficit (CAD) to remain in the

comfort zone at 2.2 per cent in 2014-15.

Moreover, the rupee value is projected at 61 against the US dollar by March-end 2015.

The participating economists cited high cost of borrowing and delays in government

approvals as the key reasons hindering investments.

India's potential growth rate below 6%: RBI report (BS 2.4.14)

Financial savings, sluggish growth, high inflation and low business confidence are the major

reasons for the revised estimate

With growth trending below the 5% mark for three successive quarters, the Reserve Bank

today pegged economic expansion at less than 6% from the earlier expectation of over 8%.

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"The wide range of estimates using alternative techniques, on balance, suggests that currently

the potential growth may be even somewhat lower than 6%," RBI said in its Macroeconomic

and Monetary Developments Report released today.

It said a decline in financial savings, sluggish growth in capital formation over successive

quarters, persistently high inflation and low business confidence are the major reasons for the

revised estimate.

However, it said a modest recovery is likely to take shape in 2014-15.

The document said potential growth, which hovered at 8-8.5% levels in the period from the

second quarter of 2005-06 to the second quarter of 2008-09, has gone down to 6%.

RBI Governor Raghuram Rajan's predecessor D Subbarao had once suggested that the

potential growth of the economy was 7.3%.

A survey of potential forecasters done by the RBI revised growth for FY15 to 5.5% from the

earlier estimate of 5.6%.

On inflation, one of the key factors that forced the RBI to keep a tight monetary policy,

which in turn affected growth, the document said that the disinflationary path is moving as

expected but stressed on the need to be vigilant.

Warning of upside risks to inflation in FY15, it said the recent declines in CPI inflation were

primarily driven by lower food prices, the benefit of which would wear out with seasonal

changes.

CPI inflation, which assumed greater focus under Rajan, eased by over 3 percentage points to

8.1% in February, while the RBI is targeting 8% by January 2015.

The professional forecasters also lowered their estimate on the average CPI during FY15 to

8% from 8.5% earlier.

ADB cuts FY15 growth estimate to 5.5% (BS 2.4.14)

Says industrial growth too sluggish; suggests government moves on

with structural reforms, push investment and manufacturing revival

The Asian Development Bank (ADB) has scaled down its estimate of

India’s economic growth in 2014-15 from 5.7 per cent earlier to 5.5

per cent. For, it has said, industrial growth does not, so far, show it

will rise to the extent expected earlier. The projection was same as the

mean of RBI's range of growth projection — 5-6 per — for 2014-15.

The Manila-based institution, in its report which was issued on

Tuesday, wanted the central government to undertake structural

reforms, boost manufacturing and revive investment, if the economy is

to grow at its potential rate.

“Industrial growth, particularly manufacturing, remained weaker than what we had expected

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at the time of the previous report,” ADB India's senior economics officer, Abhijit Sen Gupta,

told journalists. The earlier report was in October 2013.

After that, Index of Industrial Production (II) data has come for five months and three of

these — October, November and December — showed a contraction in output. In January,

the IIP recovered a bit, to show a 0.1 per cent rise. For the first 10 months of 2013-14 (April

1-January 31), it remained at the previous year's level.

In its April 2013 outlook, ADB had projected India's economy to grow 6.5 per cent in 2014-

15. “Continuing contraction in manufacturing output was a new low. Continuing contraction

in the output of capital goods and consumer durables reflects very weak investment and

consumer demand,” the report said.

Manufacturing output fell 0.7 per cent in the first 10 months of FY14 against 2.7 per cent in

the corresponding period of FY13. Consumer durable goods output declined 8.3 per cent

against a decrease of 0.7 per cent during the earlier period. There was not even a month when

consumer durables showed a rise.

Officially, India is projected to have expanded 4.9 per cent in 2013-14, higher than the 4.5

per cent of 2012-13, ADB has said the growth masks underlying weakness in the economy,

as it was due to a stronger agriculture. Excluding agriculture, the growth in gross domestic

product (GDP) slipped from five per cent in 2012-13 to 4.9 per cent in 2013-14, says the

latest report.

ADB wants the government to clear projects quickly and boost manufacturing, beside

structural reforms. For 2015-16, it projects growth at six per cent. Taking the projections at

face value, the economy will grow 5.2 per cent annually in the first four years of the 12th

five-year plan (2012-13 to 2016-17). This means the Planning Commission's original target

of eight per cent average growth a year for the plan period will not be met. After the next

government comes in and the Commission is restructured, the growth rate estimate is set to

be revised downwards.

The Bank said though the Cabinet Committee on Investment had cleared projects worth a

combined $89 billion or 4.8 per cent of GDP, most were government ones. Investments in

general have to be revived. Rana Hasan, principal economist with ADB India, said one of

India's pressing policy challenges was to create significantly more productive and well-

paying jobs. For that, manufacturing will have to play a key role. "Unfortunately,

manufacturers in India do not perform close to their tremendous potential. For many years

now, the sector has contributed around 15 per cent of GDP and 12 per cent of employment,"

he said. On the other hand, manufacturing in China, Malaysia, Thailand and Vietnam

accounts for close to 25 per cent of GDP, he pointed out. This is precisely the target of the

National Manufacturing Policy, to be achieved by 2025.

ADB says it finds the fiscal deficit target at no more than 4.1 per cent of GDP for 2014-15,

set by Finance Minister P Chidambaram, to be optimistic. This was projected to be reined in

at 4.6 per cent of GDP for 2013-14 in the revised estimate (RE), against the earlier Budget

estimate of 4.8 per cent. However, it had already overshot the RE by 14 per cent by February.

The Bank has also projected the current account deficit (CAD) to be 2.2 per cent of GDP in

2013-14, against 4.8 per cent in 2012-13, and to then grow to 2.5 per cent in the current

financial year (which began on Tuesday). Sen Gupta said it would be interesting to see how

CAD behaved once the curbs on gold import were relaxed.

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AGRICULTURAL POLICY

CACP recommends options for better handling of fertiliser subsidy (BS 4.4.13)

Suggests better distribution of subsidy and streamlining price differences between urea and

non urea fertiliser

The Commission for Agricultural Costs (CACP) has recommended several options for better

handling of the fertiliser subsidy by better distribution of the subsidy and streamlining the

price differences between urea and non urea fertiliser.

The issue has become important with the proposal to hike gas price but retaining the priority

sector allocation to fertiliser industry. This report is formed by the CACP as part of its non

price recommendations for the kharif season but it is yet to finalized and released. In its

report on the gas price hike and its impact on fertiliser industry.

CACP is of the view that the fertiliser subsidy to the farmers should not be routed through

fertiliser manufacturing units. It is learnt that the report has suggested that the complete

subsidy owing to fertiliser should be directly given to the farmers and not through priority

allocation of natural gas to fertiliser units. It will solve two problems. First, with money in

hand, the farmers will decide which fertilisers to buy and my not rely wholly on urea based

fertiliser.

Secondly, the disproportionate use of urea in agriculture would also stop. Currently, Indian

fertiliser plants mostly manufacture urea and rest of the varieties like potash and sculpture are

imported. These plants while using natural gas at administered price under priority allocation

manufacture mostly urea since it is under floating subsidy scheme of the government.

This is because unlike other varieties, in urea the government fixes the marketing price.

While the urea is sold to the farmers at the subsidized price, these companies are

compensated for the loss. Thus eve if they have facilities to process other varieties of

fertiliser, it has been deliberate attempt of the companies to stick to urea manufacturing, said

official sources.

Thus the farmers are not getting any benefit out of the fertiliser subsidy which is mainly

being given to the companies and all the farmers use is urea since that is major fertiliser

manufactured. Officials said, the idea is to largely contain the fertiliser subsidy by optimum

use of available stocks of varieties of fertiliser other than urea.

Excessive use of urea is rendering the amount of government subsidy used for importing non

urea varieties useless . It has so happened that whereas farmers are only using urea, stocks of

non urea fertilisers are lying unused since the dealers are not marketing these varieties as they

costly and farmers could not afford to buy them.

The other option suggested for rationalizing the subsidy is hiking the price of urea so that its

disparity in price with non urea varieties will be narrowed. This way the farmers will be

motivated to use even non urea varieties with same money. Accordingly, the report has

estimated that 10% increase in urea will bring down the price for non urea varieties by 15-

18%.

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For the first option, the CACP has suggested a per hectare based subsidy formula under the

direct transfer of subsidy mechanism. Sources said, the formula has been worked out in such

a manner that the area wise disparity in allocation of subsidy will go down. Conventionally,

the subsidy is mostly directed to state like Punjab, Haryana, Andhra Pradesh, and western

UP. Officials said the new formula will increase use of fertiliser in eastern states like Orissa,

West Bengal, and Bihar etc.

Agriculture Ministry proposes Rs 50/quintal MSP hike in paddy, cotton & tur

(ET 24.4.14)

The Agriculture Ministry has proposed a moderate hike in the minimum support price (MSP)

of paddy by Rs 50 to Rs 1360/quintal for the 2014-15 crop year (July- June) and upto Rs

100/quintal raise in pulses MSP.

The ministry has also proposed a Rs 50 per quintal increase in cotton MSP at Rs 3750 for

medium staple and Rs 4050 for long staple for 2014-15 crop year, sources said.

The Agriculture Ministry's recommendations on MSP of paddy, cotton and other 12

kharif crops are in line with the suggestions made by the government's statutory body

Commission for Agricultural Costs and Prices (CACP), sources said.

A Cabinet note has been moved for inter-ministerial comments. A final call on the MSP

proposal would be taken post elections by the new government.

According to sources, the Agriculture Ministry has proposed increase in the paddy MSP by

Rs 50 to Rs 1360/quintal for common variety and a raise of Rs 55 raise to Rs

1400/quintal for 'grade A' variety of paddy for the 2014-15 crop year.

A moderate increase in paddy MSP has been recommended keeping in view the excessive

stock of rice in the government godowns, sources said.

With regard to other cereals, the ministry has suggested a marginal hike in maize MSP by Rs

30 at Rs 1530/quintal for hybrid variety and Rs 1550/quintal for maldandi variety for this

year as its MSP was raised sharply two years back.

Similarly, it has suggested a Rs 50 raise in ragi MSP at Rs 1550/quintal for 2014-15 from

over last year.

However, the ministry has recommended retaining the existing MSP of bajra and maize at Rs

1250/quintal and Rs 1310/quintal, respectively, for 2014-15 crop year.

It has also proposed keeping the MSP of groundnut and soyabean unchanged for this year at

Rs 4000/quintal and Rs 2500-2560/ quintal, respectively.

As far as pulses are concerned, the Agriculture Ministry has recommended a Rs 50 hike in

the support price of 'Tur' and 'Urad' at Rs 4350/quintal each for 2014-15.

The ministry has recommended a Rs 100 increase in MSP of 'Moong' at Rs 4600 per quintal

for this year to keep inter-crop parity within kharif (summer) pulses.

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With regard to oilseeds, the ministry has proposed to keep groundnut and soyabean MSP

unchanged for 2014-15. However, it has suggested an increase of Rs 50 in the support price

of sunflower seed at Rs 3750/quintal from over last year, besides Rs 100 hike each in MSP of

sesamum and nigerseed at Rs 4600 and Rs 3600/quintal, respectively, for this year.

Sowing in the kharif (summer) season begins with the start of the south west monsoon from

June and harvesting will commence from October.

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RICE

‘Farmers must take up new rice varieties’ (BL 8.4.14)

Rice scientists are urging farmers to take up new and improved varieties of rice to meet the

rising demand.

“There is a great need for gradually phasing out the old varieties of rice with the new and

improved varieties. We are working overtime to encourage farmers in this regard,” said

Swapan K Datta, Deputy Director General (Crop Sciences) Indian Council of Agricultural

Research.

“Rice, followed by wheat, continues and will remain the number one food crop in our

country,” he said.

Over 450 top scientists engaged in the field of rice research took part in the 49th All India

Annual Rice Group Meetings organised by Directorate of Rice Research in Hyderabad on

Sunday. EA Siddiq, Honorary Professor (Biotechnology), ANGRAU, said the ability to

sustain the growth in the next decade is a big challenge as India will need to produce 20-25

million tonnes more than existing capacity.

Exporters say no to large-scale field trials of GM rice (FE 10.4.14)

India's rice exporters have expressed concern over allowing large-scale field trials of the

crop's genetically modified (GM) version, saying it could adversely impact its marketability

abroad.

India's rice exporters have expressed concern over allowing large-scale field trials of the

crop's genetically modified (GM) version, saying it could adversely impact its marketability

abroad.

Recently, the Genetic Engineering Approval Committee (GEAC) approved 'confined field

trials' for 10 agricultural crops, including rice.

These approvals, however, need no-objection certificates from the concerned state

governments.

The trials approved by GEAC in February include Bayer Bioscience’s GM rice for insect

tolerance, Mahyco and BASF India’s proposals on GM rice.

"Questions also might be raised on Indian rice growers adopting GMO varieties purely for

the higher yield and pest resistance while choosing to ignore the undesirable effects on

consumers," MP Jindal, president, All India Rice Exporters Association (AIREA), told FE.

Jindal said unless there were conclusive reports based on extensive testing in controlled

environments, it would be against the interest of the rice industry to support trials of GM

crops.

However, KV Prabhu, deputy director, Indian Agricultural Research Institute (IARI), said

trials approved by GEAC is only for restricted cultivation under strict supervision. “Large-

scale trails of GM rice would take time after obtaining scientific validation,” Prabhu noted.

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Till now, the government has approved commercial cultivation of BT cotton while

commercial cultivation of BT brinjal has been put under moratorium since 2010.

India is estimated to have earned Rs 30,000 crore in the last fiscal from rice (basmati and

non-basmati) exports. India ships grain to mostly to West Asian countries, US, EU and many

African nations.

The sharp rise in demand for basmati and non-basmati rice in Africa and Asian countries is

pushing India to top of the world's rice exporting nations' list.

According to AIREA estimate, more than 3.9 mt of basmati rice and 6 mt of non-basmati was

exported in 2013-14. In the previous two fiscals, India shipped 10 mt of the key foodgrain.

Thailand and Vietnam are the other key rice exporters who ship around 7 mt of rice annually.

India is all set to earn close to Rs 40,000 crore from rice exports this fiscal from Rs 33,000

crore earned in the previous year.

Apart from Iran, other key destinations for Indian basmati are Saudi Arabia, UAE, Kuwait

and Iraq. Non-basmati rice is exported to mostly African countries, including Nigeria and

Senegal.

The last seven years have been watershed years as far as India's basmati rice exports go.

From a modest Rs 2,792 crore in 2006-07, exports crossed the Rs 25 ,000-crore mark last

fiscal.

A commerce ministry official said rice exports have been rising steadily since the

government lifted a four-year-long ban on non-basmati rice exports in September 2011.

Against the grain: Major rice producers least market-friendly (FE 15.4.14)

The states that contribute a major chunk of rice to the government’s procurement drive have

the least market-friendly policies when it comes to grain trade...

The states that contribute a major chunk of rice to the government’s procurement drive have

the least market-friendly policies when it comes to grain trade, as per a Commission for

Agricultural Costs and Prices (CACP) report. Recommending improvement in the

functioning of the market, the commission has suggested that instead of a price-centric

minimum support price (MSP) policy, the focus should be on “getting the market right and

establish a single barrier free market with minimum controls”.

Evaluating 18 states based on different parameters, the commission has accorded Gujarat,

Assam, Himachal Pradesh, Bihar and Kerala the top five ranks for market friendliness in that

order and clubbed them together in the “green” category. However, all these states contribute

small to negligible quantities to the Centre’s rice procurement drive.

Uttarakhand, Madhya Pradesh, Uttar Pradesh, Odisha , Haryana, Punjab, Andhra Pradesh and

Chhattisgarh have been put in the lowest (red) band, with their ranks in descending order.

Pertinently, these eight states contributed more than 28.6 million tonnes of rice to the central

pool out of 34 million tonnes grain procured by the Food Corporation of India (FCI) in the

2011-12 marketing season, the commission’s review period.

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The CACP’s ranking is based on the basis of taxes/levies on the MSP, bonus announced by

state governments over MSP to farmers (which jacks up procurement cost) and rice procured

compared to production, stock limits fixed, levy rice and the state of market reforms under

the Agricultural Produce Market Committee (APMC) Act.

CACP, which advices the government on fixing MSP of around 22 agricultural crops

annually, ranked Tamil Nadu, Karnataka, Maharashtra, West Bengal and Jharkhand in the

median “amber” category as far as adoption of market-friendly policies are concerned.

“State governments need to facilitate the setting up of adequate infrastructure such as storage

facilities by the private sector, milling capacities... They also need to be discouraged from

embarking on a high procurement mission, as it is detrimental to the competitive functioning

of the product markets and discourages private sector participation,” the CACP has noted.

The commission had also said the government must review its policy of following an open-

ended procurement and limit its purchases to, say, only 75% of last year’s purchases,

especially from states that levy bonus and high taxes.

s reported by FE earlier, key states that contribute a significant chunk to the central rice

procurement drive have the highest tax burden on grain procurement, with Punjab levying

14.5%, followed by Andhra Pradesh (12.5%), Haryana (11.5%), Chhattisgarh (9.7%) and

Odisha (12%).

Ashok Gulati, former chairman, CACP, had told FE that higher taxes and other statutory

levies imposed by grain-procuring states distort and fragment the national market and drive

away private sector participation from grain purchase, impacting the processing and value-

added industry.

Basmati lends fragrance to rice exports (BL 16.4.14)

Basmati rice exports have doubled in volume and tripled in value in the last four years on

strong demand from traditional markets in Iran and West Asia.

For the fiscal ended March 2014, shipments of basmati scaled a new high, touching 4.02

million tonnes and exceeded $4.5 billion in terms of value compared with the previous fiscal.

Apart from increased demand, higher prices aided by a decline in rupee boosted basmati

shipments to ₹28,189 crore, a 48 per cent growth over last year.

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Though exports of non-basmati rice grew 4 per cent in value to ₹14,479 crore in 2013-14, in

volume they were down some 4 per cent.

Total rice shipments grew 3.5 per cent to 10.5 million tonnes.

Eyeing China

“India continued to be the largest rice exporter for the third year in a row,” said R

Sundaresan, Executive Director, All India Rice Exporters Association (AIREA).

The rice exporter’s body is targeting a 10 per cent growth in shipments in the current year.

“We are trying hard to gain access to the Chinese market,” Sundaresan said. Iran was the

largest buyer of Indian basmati, followed by Saudi Arabia and Iraq during the year. This

growth in demand was despite higher prices.

Basmati prices were higher by 50-70 per cent in 2013-14 over last year on higher paddy

prices.

Iran imported over 1.4 million tonnes, followed by Saudi Arabia which bought 7.1 lakh

tonnes and Iraq over two lakh tonnes.

Non-traditional markets

“Rising consumption in West Asia, estimated at around 10 per cent annually, is driving the

demand for Indian basmati,” said Anil Mittal, Chairman and Managing Director, KRBL Ltd,

the country’s largest exporter.

Apart from Iran, countries such as the US, Iraq, Afghanistan and African nations, such as

Ghana, Nigeria, and Ivory Coast, have been buying more of Indian basmati to cater to their

growing demand, Mittal said.

New variety

Further, with the increase in adoption of newer variety 1590, which is considered farmer-

friendly because of its high yields and disease-resistance characteristics, basmati production

is poised for a big jump in production in coming years, Mittal said.

African demand

Non-basmati rice continued to witness strong demand from African countries.

Republic of Benin in West Africa was the largest buyer of Indian non-basmati rice, followed

by Senegal, Bangladesh and South Africa.

Benin imported about 1.14 million tonnes, followed by Senegal at 6.2 lakh tonnes.

Bengal may see 25% higher summer rice crop (BS 25.4.14)

Summer rice crop in WB likely to be higher by 25 per cent to 7.5 million tonnes

Ahead of elections in West Bengal, a bumper boro or summer paddy crop is expected to

come as a relief for the government. Nearly 68 per cent of the population resides in rural

areas.

17

The boro crop is sown during January-

February and harvested in April-May. It

was sown over nearly 1.5 million hectares

this year. Informal estimates suggest the

production this year could be close to 7.5

million tonnes, against nearly six mt last

year, a rise of nearly 25 per cent.

“Field conditions suggest a bumper boro

crop, due to good weather and timely water

supply,” said Pranab Chatterjee, professor at Bidhan Chandra Krishi Viswavidyalaya.

Rice production in West Bengal is spread across three seasons — aus, aman and boro. Of

these, the kharif rice (aus and aman) account for about 70 per cent of the state’s roduction.

In 2012-13, the state produced 15.3 mt of rice, an increase of 5.5 per cent over 2011-12.

In October last year, floods in West Bengal had destroyed much of the aman or winter crop,

leading to farmer suicides This year, the districts affected by floods included the high rice-

productivity districts of Bardhaman, Hooghly, Birbhum and Nadia.These account for 27 per

cent of the rice sowing and 32 per cent of output.

This year, boro acreage was the same as last year, due to a rise in the cost of electricity,

fertiliser, labour and diesel, said Ramprasad Biswas of the Gotra Krishi Samanvayi Samiti,

Bardhaman.

However, high groundwater retention after floods and adequate supply from the Damodar

Valley Corporation helped farmers to a good harvest.

Caught between drought and floods, farmers in West Bengal have been struggling with

falling realisations. In addition, a poor procurement policy had often led to distress sales.

18

19

WHEAT

Whittling down wheat profits (FE 3.4.13)

India’s wheat production this year is estimated to be at 93-95 million tonnes (mt). The

government is holding 21 mt of wheat as on March 1, 2014 and will add about 30-34 mt

India’s wheat production this year is estimated to be at 93-95 million tonnes (mt). The

government is holding 21 mt of wheat as on March 1, 2014 and will add about 30-34 mt of

the new rabi crop of the 2014-15 in the next two months. Against buffer of 20 mt, it will

accumulate 48-50 mt by June —about 150% higher inventories than required.

Food Corporation of India (FCI) has been shedding excess stocks through exports.

Surprisingly, FCI has decided to deprioritise exports at a time when the world market is

unusually upbeat. The reason—by diverting export demand to mandis, the government wants

to escalate the open market price—more than the MSP—at harvest time (April-May), to

shrink wheat procurement to the minimum.

FCI has exported about 5.5 mt through PSUs in the last two years but is suddenly dithering to

contract even the last leg of 0.5 mt. Recent tenders specify pruned down quantities to 30,000-

35,000 metric tonnes each, instead of twice or thrice—70,000-1,00,000 metric tonnes offered

earlier. The future of exports from FCI is uncertain, while conditions are slightly bullish for

the world wheat market.

Globally, wheat is up by $30 or 10% since mid-February owing to developments in Ukraine

and weather issues in the US. FOB realisation can be around $295-$300 per mt or more in

April-May, against a recent average sale price of $280 and the minimum export price of

$260. Shipping out large tonnages at low prices earlier (November-February) and restricting

exports now, when prices are bullish, defies common sense. Domestic market is agog with

rumours of a possible prohibition on wheat exports. Logically, shipments should be stepped

up when a niche window of higher values is available. The market maxim that governments

are seldom logical, and largely political or irrational, stands proven!

One view could be that the food ministry is gunning for lesser acquisition of grains in the

new season due to the substantial carry-in stocks and because the Food Security Act has been

held in abeyance. Pressing of the pause button by the FCI may be key to that strategy.

The tactical move is to let the private exports continue from open markets. Farmers will

prefer selling to exporters at R15,500-15,700 per mt—NCDEX price for May 2014—instead

of going to the FCI for an MSP of R14,000 per mt. Some short export sales can trigger a

scenario of even better prices (for a very limited tonnage). Farmers may thus be tempted to

hold back produce from the FCI. By end-June, FCI will exit procurement with lower

acquisition and growers will have to fend for themselves for rest of the year.

However, higher domestic prices coupled with stronger rupee may make exports unviable.

Exporters generally pay on 30-day credits to growers; FCI pays against delivery. Due to

unseasonal rains in March, exporters will avoid damaged crop. Farmers’ preference for the

FCI may remain. Historically, FCI procures significantly more in those years when the

harvest goes bad with some quality issues. The R1,500 per mt bonus offered by Madhya

Pradesh will also lure farmers to offload to official agencies. Gujarat has reported about 1.5-2

mt more output over last year and will thus curb inflationary pressures. Anticipation of a

20

prohibition on export will tank the market. On the contrary, the prospects of the government

ending up procuring more are rather high. The net result would be: missed exports, lower

procurement game of the government fails and farmers despair.

The recent trend in the government to meddle and manage prices of food items in a upward

direction, to the detriment of consumers in the name of farmers, contradicts sound

macroeconomic policies. The principle of equity and fair play is negated when governments

surreptitiously create conditions of short-term, non-sustainable high prices that finally put

growers in a loss or erode profitability.

Official procurement of wheat should take place as per the policy. If the policy is unsound

then redefine rules transparently. Governments are meant to create an environment conducive

to business rather than to be in the business of distorting business and prices. This unfair

game of market price manipulation must be shunned and exports, when stocks are plenty, be

enabled both from official and domestic sources at best prices.

Export prospects set to keep wheat prices firm (BL 4.4.13)

Ukraine crisis opens up opportunity abroad as millers, shippers scour for produce

As prolonged winter and unseasonal rain delay wheat harvest across major growing regions

in North India, the price of the foodgrain is ruling firm across key markets amidst strong

demand.

A large section of the trade expects wheat prices to rule firm and hover above the minimum

support price level of Rs. 1,400 a quintal in the largest producing State of Uttar Pradesh,

where the Government procurement mechanism is traditionally weak. The modal price or rate

at which most trades take place in markets such as Bareily and Etawah were Rs. 1,600 and

Rs. 1,520, respectively, on Thursday.

“Arrivals have been thin, but there is a good demand from millers and exporters,” said a

trader at Shahjahanpur who procures for multinational exporters.

With the political crisis in Ukraine affecting exports from the Black Sea region, India has

emerged as a major source for wheat shipments.

“It’s a big crop. Some States have declared bonus and that’ll keep the prices higher. We are

waiting for the main arrivals to start in UP,” said Pravin Dongre, Chairman of the Indian

Pulses and Grains Association. “Internationally it is a bull market and the prices will stay

supported,” Dongre said, suggesting that Government should take advantage by allowing

more exports.

Volatile weather

The Government has projected wheat production at 95.6 million tonnes, but the crop size is

expected to be lower on account of unseasonal rains and hailstorms affecting the crop in

Madhya Pradesh, Rajasthan and Maharashtra. Rains still continue in the Punjab, Haryana and

parts of Uttar Pradesh.

“Arrivals in UP have a higher moisture of over 15 per cent and we are waiting for the main

arrivals,” said Adi Narayan Gupta, former president of the millers body.

21

Trade sources said that with Rajasthan announcing a bonus of Rs. 150 a quintal, there could

be a flight of produce from the neighbouring Uttar Pradesh to the desert state. May and June

contracts on NCDEX are ruling firm at Rs. 1,558 and Rs. 1,574, respectively. “Prices are

likely to rule firm,” said MK Dattaraj, Managing Director of Krishna Flour Mills, in

Bangalore. “UP could be a real game changer. If there is a shortfall in output, we are in for a

higher price,” Dattaraj said adding that clarity on the situation is likely to emerge by May.

Though millers like Dattaraj have bought some quantity from Rajasthan and Madhya

Pradesh, exporters who are active have procured the entire produce in Gujarat.

Procurement delay

The Centre intends to procure about 31 million tonnes of wheat this year, up from 25 million

tonnes last year. The procurement, which normally starts on April 1, has been delayed by

three to four weeks this year.

As on March 1, the wheat stocks in the Central pool stood at 20.83 million tonnes, much

higher than the strategic buffer and reserve norm.

FCI sells 5.8 mt of wheat under OMSS (FE 5.4.13)

Against a target of 8.5 million tonne (mt) of wheat to be sold to bulk buyers such as flour

millers under the Open Market Sale Scheme

Against a target of 8.5 million tonne (mt) of wheat to be sold to bulk buyers such as flour

millers under the Open Market Sale Scheme (OMSS), the Food Corporation of India (FCI)

has managed to clear about 5.8 mt of grain by the end of last fiscal.

According to official data, FCI had sold 6.4 mt of grain under OMSS in the previous fiscal.

Officials said wheat was being sold by the FCI through a weekly tender to the private traders

with a base price of R1,500 a quintal along with freight cost to the locations concerned.

The corporation has realised an average price of more than R1,603 a quintal for the wheat

sold to private traders last fiscal.

Out of the total quantity sold through OMSS, close to 2 mt of grain had been sold to traders

in Haryana (1.1 mt) and Punjab (8 lakh tonne).

However, against an allocation of 1 mt of wheat to small private traders, FCI has sold only

2.7 lakh tonne last fiscal. OMSS had been winded up at the end of March as the wheat

procurement for the new marketing season (2014-15) started on April 1.

Although the Cabinet cleared sale of excess stocks in September, 2013, there was lukewarm

response initially to the OMSS because grain was to be sold only at depots in Punjab and

Haryana. Subsequently, the government decided to allocate grains at state level depots of

FCI.

About 20 key consuming states such as UP, Madhya Pradesh, Kerala, Tamil Nadu,

Karnataka, Orissa, Bihar, West Bengal and Maharashtra were allocated 2 lakh tonne of wheat

for sale to bulk buyers. Himachal Pradesh and northeastern states were allotted 50,000 tonne

each under OMSS.

Traders said the decision to release grains under OMSS would help contain prices.

22

As per the Agricultural Marketing Information Network (Agmark) data, wholesale wheat

prices were quoted on Friday at Rs 1,630 a er quintal in Ghaziabad and R1,590 a quintal in

the Ajmer market while grain price was R1,550 a quintal at Khanna market (Punjab).

The aim of OMSS had been to sell excess wheat stocks in the open market as the corporation

has more grain stocks than required.

At present, the corporation has wheat stocks of more than 20 mt while the procurement for

the current year (2014-15) has just commenced. FCI has a wheat stock of more than 18 mt at

the start of the month while it is aiming at purchasing 31 mt of grain from the farmers in next

two months.

Grain stocks at 4-yr low (BS 5.4.13)

FCI purchases huge quantities of maize as prices drop

The Food Corporation of India (FCI) has started wheat

procurement for 2014-15. Stocks are at a four-year low. The

procurement drive is expected to gather steam in the coming

weeks.

According to FCI data, foodgrains stocks in the central pool were

38.11 million tonnes (mt) on April 1, 2014, against 59.75 mt on

April 1 last year. The last time FCI had less stocks than current

levels was on April 1, 2009 — at 35.58 mt.

Notably, while the stock levels are lower compared with previous

years, the stocks are higher than the required quantity of 21.2 mt as on April 1.

According to experts, this could save FCI from storing stocks in excess of its storage capacity

as and when the procurement season draws to a close, some time in June.

The drop in overall foodgrains (wheat and rice) stocks in the central pool has been largely

due to lower-than-anticipated wheat procurement in 2013-14 and a 30 per cent drop in

procurement of rice against the target, which pushed down the foodgrain stock in the central

pool.

In 2013-14, FCI purchased about 25 mt of wheat against a target of 40 mt, while rice

procurement till date was estimated at about 26 mt against a target of 34 mt.

Although rice procurement continues till September (rice crop year is from October to

September), bulk of the purchases would be over by March. The corporation has self-owned

and hired storage capacity of over 72 mt.

From the 38.11 mt of foodgrains stock, wheat were estimated to be around 17.83 mt, while

rice was estimated at 20.27 mt. April is the crucial month for FCI, as this is the time when

procurement of wheat starts in full swing across the country and the stock

position shows signs of deteriorating. It also signals the way things would move in the

coming months.

Meanwhile, in a related development, FCI has procured the highest quantity of maize since

2009-10 as bumper harvest pulled down market rates.

23

According to a senior government official, till March 31, 2014, FCI procured around 109,000

tonnes of maize, which was among the highest since 2009-10. In 2012-13, FCI procured just

2,243 tonnes of maize.

Other officials said apart from a drop in price due to bumper harvest, the Corporation is also

purchasing maize to meet the requirement of coarse cereals under the National Food Security

Act.

Industrial grade maize, used by the feed meal and processing industry, is priced at Rs 1,145-

1,200 a quintal in the open market - much below the government-fixed maximum selling

price of Rs 1,310 a quintal. India’s maize production in 2013-14 kharif season is estimated to

be around 18 million tonnes and for the full year, it could be over 23 million tonnes.

Foodgrains Stocks in Central Pool

(in million tonnes)

Date Stocks

1-Apr-14 38.11

1-Apr-13 59.75

1-Apr-12 53.39

1-Apr-11 44.31

1-Apr-10 43.3

1-Apr-09 35.58

Note: foodgrains include both rice and wheat

Source: Food Corporation of India

Global wheat output may decline to 700 MT in 2014-15: IGC (ET 11.4.14)

Global wheat output is expected to drop marginally to 700 million tonnes in the 2014-15

crop year, says the UK-based International Grains Council (IGC).

For the ongoing 2013-14 crop year, it is projected to be 709 MT. The crop year varies from

country to country. In India, the world's second largest wheat producer, it runs from July to

June.

In its latest report, IGC said global wheat output is expected to be just sufficient to meet the

demand, which is estimated to increase to 700 MT in 2014-15, from the projected 692 MT for

this year.

"Growth in food and feed demand is expected to entirely absorb output, with carryover stocks

forecast to be little changed at 190 million tonnes in 2014-15," IGC said.

Due to tight supply-demand situation, global wheat exports are expected to be down at 143

MT in 2014-15, as against 150 MT this year, the report said.

In the ongoing 2013-14 crop year, IGC said wheat output in China is expected to increase

marginally to 121.7 MT, while it is likely to drop slightly to 93.5 MT in India.

24

Wheat procurement set to pick up in Punjab, Haryana (BL 14.4.14)

Centre to procure 31 million tonnes against 25 million tonnes last year

Procurement of wheat for the central pool stocks will gain pace this week on expected

increase in market arrivals in Punjab and Haryana.

The harvest of wheat has been delayed by prolonged winter and unseasonal rains this year

resulting in arrivals being limited so far in these States.

According to Food Corporation of India (FCI) officials, stocks so far in the Central pool

stocks have been estimated at 14.7 lakh tonnes, mainly from Madhya Pradesh.

The wheat bought by the Government agencies, is about a tenth of the cereal procured last

year.

Smaller quantities have been procured from Rajasthan and Uttar Pradesh also, sources said.

In Punjab and Haryana, officials said FCI is geared up to procure wheat from next week and

is waiting for market arrivals.

Waiting for stock

Typically, wheat procurement season starts from April 1 in Punjab and Haryana.

The Centre intends to procure about 31 million tonnes (mt) of wheat this year, up from 25 mt

procured last year.

Bulk of this would be from Punjab and Haryana.

“The harvest has begun in some areas and we expect arrivals to pick up next week,” said Raj

Sood, a trader in Khanna market.

Sood expects the market arrivals this year to be 10-15 per cent higher than last year as an

extended winter has boosted yields this year.

In Punjab, the procurement target is pegged at 11.5 mt, up from last year’s 10.95 mt.

Similarly in Haryana, the Government agencies expect about 6.5 mt this year, higher than last

year’s 5.88 mt.

Meanwhile, in central Uttar Pradesh, arrivals have picked up and the private trade, led by

exporters and domestic millers, is active.

Prices firm

This buying is seen holding the price firm and wheat is currently trading higher than the

minimum support price levels in various markets.

The Centre had set a MSP of ₹1,400 a quintal for the current season.

The Government agencies have received good response for the wheat tenders opened on

Friday with bids from foreign buyers topping the $280 levels, much higher than the floor

price of $260/tonne.

25

Wheat procurement reaches 10 lakh tonnes in Haryana (BS 16.4.14)

Over 10 lakh tonnes of wheat has arrived in Haryana with crop arrivals picking pace in the

current procurement season.

A Food and Supplies Department official said government agencies have procured 9,91,851

tonnes of wheat.

He said Food and Supplies Department procured 3.40 lakh tonnes of wheat, HAFED 2.82

lakh tonnes, Agro Industries Corporation 81,923 tonnes, Haryana Warehousing Corp 1.10

lakh tonnes, CONFED 18,589 tonnes and Food Corporation of India 1.58 lakh tonnes during

current procurement season so far.

He said that district Karnal is leading in the wheat arrival where 1.79 lakh tonnes of wheat

has arrived in the mandis, followed by Kaithal 1.66 lakh tonnes.

Similarly, in Kurukshetra 1.14 lakh tonnes wheat arrived, followed by Sonipat 98,974 tonnes,

Faridabad 54,518 tonnes, Panipat 52,358 tonnes, Ambala 40,947 tonnes, Jhajjar 22,283

tonnes, Rohtak 22,283 tonnes and Gurgaon 13,755 tonnes.

Wheat procurement down 62% as rains in Punjab delay harvest (FE 22.4.14)

The government's wheat procurement drive for the current marketing season (2014-15) is

progressing at a slow note...

The government's wheat procurement drive for the current marketing season (2014-15) is

progressing at a slow note because of delays in arrivals of the foodgrain across mandis in

Punjab, the biggest contributor to the central pool.

According to food ministry data, the Food Corporation of India (FCI) and state government-

owned agencies in key growing states — Punjab, Haryana, Madhya Pradesh, Rajasthan and

Uttar Pradesh — have purchased only 6.7 million tonne (mt) of foodgrain from farmers till

Monday, against 10.9 mt purchased during the same period last year. This is a decline of 62%

compared to last year.

The government has set a wheat procurement target of 31 mt for the current year.

A food ministry official told FE that the slowdown in procurement is mainly due to delay in

harvesting because of unseasonal rains which lashed Punjab late last month. FCI and state

government agencies such as Pungrain have lifted only 6 lakh tonne of wheat from Punjab

farmers till Monday, against 3.5 mt purchased during the same period last year.

An official from Pungrain said procurement would pick up pace in the coming days. The

government has set an 11-mt wheat procurement target for Punjab. The procurement drive for

the year formally commences on April 1 and winds up by May in key growing states,

although officially it continues till June.

Till Monday, the agencies have purchased 2.7 mt of wheat against 3.6 mt lifted during the

same period last year. Similarly, Madhya Pradesh Civil Supplies Corporation has purchased

3.1 mt of wheat from farmers till now, which is a marginal decline from last year. Others

states such Rajasthan (1.5 lakh tonne) and Uttar Pradesh (23,000 tonne) have contributed

marginally to the procurement drive.

26

Last year, the government had to scale down the procurement target from 34 mt to 26 mt and

eventually ended up purchasing 25 mt of grain from farmers.

In the 2013-14 marketing season, Punjab and Haryana contributed 10.8 mt and 5.8 mt to the

central pool. For the 2014-15 period, government agencies in Punjab and Haryana are

expected to purchase 11 mt and 6.5 mt, respectively.

Similarly, Madhya Pradesh has set a higher wheat procurement target of 8 mt for 2014-15,

against 6.3 mt purchased from farmers last year.

Other states who have set higher procurement targets include Uttar Pradesh (3 mt) and

Rajasthan (1.8 mt).

A food ministry official had earlier stated that lower wheat procurement during 2013-14,

mainly attributed to increase in private purchases and a decline in wheat production, were the

key factors behind lower procurement of grain this year.

The government had announced a R50 hike in minimum support price to R1,400 per quintal

for wheat procurement for the 2014-15 marketing season.

FCI purchases wheat from farmers for allocating it to states for distribution under the targeted

public distribution system and maintaining buffer stocks and strategic reserves norms.

India to gain from global wheat market rally (BL 23.4.14)

Wheat was the top gainer among commodities last week, rising five per cent, on Ukraine’s

problem with neighbouring Russia and a report from the US Department of Agriculture

projecting lower plantings and supply this year.

For Indian growers, this comes at an opportune time since the country can take advantage of

the space left by these major exporting nations in the global market.

“There is a threat of sanctions against Russia over its standoff with Ukraine. It has created an

uncertainty over supplies,” said TPS Narang, former Director of PEC and currently an

analyst.

Ukraine is facing unrest after its President Viktor Yanukovych was toppled in February in an

uprising. This was followed by Russia’s intervention in Crimea separating from Ukraine and

Kiev threatening to take action against extremists, mainly pro-Russian supporters, leading to

another tiff with Moscow.

With the European Community and members of the North Atlantic Treaty Organisation

hinting at sanctions against Russia for its confrontation with Ukraine, unrest is brewing in the

former Soviet Union region.

Global projections

Besides, the vagaries of weather in the US as well as the Commonwealth of Independent

States Region are also likely to affect wheat supplies.

27

According to the US Department of Agriculture, wheat plantings this year are likely to be one

per cent lower, while supplies are projected to be downby five million bushels at 118 million

bushels. US ending stocks are seen lower by 135 million bushels at 583 million bushels.

But the main concern for the US is the drought in central and southern plans with conditions

in Texas being poor. Overall, weather conditions are projected to be mixed for US wheat this

year.

The department, however, estimates wheat prices to range between $6.75 and $6.95 a bushel

against $7.77 this season ending June.

On Tuesday, wheat on the Chicago Board of Trade for delivery in July was quoted at $6.75 a

bushel.

Indian wheat

“India stands to benefit from these developments. Except India, no other country can supply

during April-July,” said Narang.

Last week, South-East Asian sellers offered wheat at $313 (₹19,025) a tonne but buyers did

not offer more than $290 (₹17,625). “Indian wheat is quoting at $280-281 (about ₹17,100)

f.o.b. There is good acceptance of Indian wheat in South-East Asia and the Gulf for milling,”

said Pramod Kumar, Director of Sunil Agro Mills in Karnataka.

Depending on exchange rate movement, wheat prices are quoted as high as $284 (₹17,300),

said Narang.

“Actually, if the Government exports wheat, it can fetch higher prices. Currently, it is the

private sector that is exporting the grain. And private exporters are trying to outwit one

another, resulting in the advantage being lost,” he said.

Exports

The Centre stopped exporting and also allocating wheat from buffer stocks since last month

on fears that unseasonal rains in central and north-western parts could affect production.

According to Kumar, deals to export at least 10 lakh tonnes of wheat have been signed by

private firms during March-April.

Trade sources said multinational firms such as Glencore, Cargill and Louis Dreyfus, besides

domestic firm ITC, have struck deals. Wheat stocks are currently 17.8 million tonnes, higher

than stipulated norms, while the Government plans to add another 31 million tonnes through

procurement by its agencies.

"Basically, the government could be left holding 70 million tonnes of foodgrain. Therefore, it

would be wise to allow exports instead of investing in stocking up wheat,” Narang said.

This has resulted in open market rates ruling higher than the minimum support price of

₹1,400 a quintal. Currently, quality arrivals in markets such as Etah in Uttar Pradesh are

fetching ₹1,425.

28

On the NCDEX, wheat for delivery in July is quoting around ₹1,600.

“The problem with wheat now is high moisture, especially regarding crop in Punjab and

Haryana. Therefore, most of the arrivals are fetching only around ₹1,400,” said Raj Narayan

Gupta, a miller in Uttar Pradesh.

“The crop has been affected in Madhya Pradesh, Punjab and Haryana. We expect production

to be lower than the Government’s estimate of 95.6 million tonnes,” said Gupta.

Last year’s production has been pegged at 93.51 million tonnes but the industry contends the

estimate, saying it was lower.

“Gujarat crop was the first to arrive and most of it has been bought by exporters,” said Gupta.

If the BJP comes to power, it could allow exports, said Narang. The USDA estimates Indian

wheat exports to touch five million tonnes next season starting July.

Wheat procurement in 2014-15 may slip, says food secretary (BS 23.4.14)

However, PDS won't be hampered as govt hold 48 mn tonnes in its warehouses

The government on Tuesday said its wheat procurement for the 2014-15 marketing year

(ending March 2015) is likely to be below the last year’s level of 25 million tonnes (mt) due

to poor quality of the crop. However, for a government which has been battling lack of

storage space during the ongoing wheat procurement season, this has come as a blessing in

disguise.

“Last year, FCI (Food Corporation of India) had procured 25 mt of wheat. As per my own

assessment, this year’s overall wheat procurement would be lower than the last year’s,” Food

Secretary Sudhir Kumar said at a seminar on flour mills.

Good purchases by private millers might also restrict government procurement to below 25

mt, another official said. If procurement drops below 25 mt, it would be the lowest ever

wheat purchased by government agencies in the past three years. However, low wheat

procurement would not hamper India's public distribution system, as the government still

holds over 48 mt grains (wheat and rice) in its warehouses. The government had set a target

of purchasing 31 mt wheat in 2014-15.

According to food ministry data, FCI and state government-owned agencies have procured

7.5 mt wheat so far this year, significantly lower than 11.96 mt purchased in the year-ago

period. FCI along with state agencies have around 80 mt of storage capacity with them.

The wheat marketing year runs from April to March but FCI’s procurement operation gets

completed in three months.

According to food ministry officials, the pace of wheat procurement in Punjab is very slow

due to delayed harvesting in the state, following recent unseasonal rains.

FCI has been able to procure 940,581 tonnes in Punjab this year, against 4.3 mt in the same

period last year, showed official data. Wheat growers in Punjab have complained of non-

procurement of crop by procurement agencies, citing higher moisture content. In Haryana,

procurement is down marginally at 3.2 mt as of Tuesday, against 3.7 mt a year ago.

29

Procurement in Madhya Pradesh is at 3.17 mt against 3.6 mt during the year-ago period.

Procurement in Rajasthan, Uttar Pradesh and other growing states is trailing behind the last

year's level.

Wheat production in India, the world's second largest grower, is earlier pegged at 95.6 mt for

2013-14 (July-June), but bad weather during the harvesting stage is expected to drag it down

by three-four mt. The production stood at 93.5 mt in the previous year.

Highlighting the importance of fortified wheat flour (enriched flour) to address malnutrition

in the country, Kumar said the flour milling industry should take proactive steps to promote

the product in the country.

“About 30 per cent of world flour is fortified. It is very less in our country. There is nutrition

deficiency not only in poor section but also among affluent class,” he said.

30

31

COARSE CEREALS /MAIZE

Despite long term bearishness, India can double maize exports (BL 25.4.14)

In a shackle-less environment, additional shipments can be made in the short-term

India produces about 23 million tonnes (mt) of maize annually, consumes 19 mt and exports

4 mt. The average yield is 2.5 tonnes/hectare. Our production, consumption and exports are

under careful watch internationally by other competing origins (the US, Brazil, Argentina,

Ukraine) because India’s export intensity can scale up competitively over the next few years

to nearby destinations such as the Far-East and West Asia.

It will be the Indian David that will compete against Goliaths of world corn trade. The US is

more concerned as its share in world corn trade has declined from 63 per cent in 2000 to 36

per cent in 2014 with other nations boosting their output.

Indian agricultural exports topped $45 billion this year from about $20 billion in 2009-10.

Rupee depreciation has also helped.

A Crisil report of March said: “Agriculture growth picked up to 3.6 per cent per year during

the 10 fiscals from 2005 to 2014, from 2.9 per cent 10 years prior to 2005 and compared to

sub-1 per cent in the 10 fiscals ending 2004. Agricultural investment, fertiliser-use intensity

and credit growth stand out as three factors that improved markedly in the past 10 fiscals and

boosted agricultural growth.” This statistical narration of upward trajectory can be

corroborated by expansion in rice output in eastern India, higher wheat production in MP,

Gujarat and Bihar, cotton revolution and Bihar’s contribution to maize output.

Domestic demand vs export

At a recent conference on maize in New Delhi last month, Indian speakers were hopeful that

with the current tempo maize production will double to 40-45 mt in next five years through a

combination of higher yield (4-5 tonnes/hectare) and preferably, without significantly

enlarging the acreage. (US’ yield is maximum 10 tonnes/hectare while Latin American range

is 5-6 tonnes). Indian export surplus would be 7-8 mt.

Foreign delegates referred to declining usage/expenditure on gasoline in the US implying

lower ethanol consumption, thereby leading to softening in corn prices. (In the US, 33 per

cent corn out of total production of 353 mt is used for ethanol) .

US’ shale gas will also reduce prices of crude oil. Lower international energy values also

mean lower corn prices. The US is simultaneously strategising shipments through shorter sea

voyage channels for economising freight to neutralise India’s geographical advantage in Far-

East/West Asia/South Asia, etc.

Thus India will be competing at bottom line values with the US, Brazil, Argentina, and

Ukraine which, respectively, produce and export about 353 mt (export 42 mt), 70 mt (export

21 mt) and 24 mt (export 13mt), 30mt (export 14mt).

In short, the indirect message is that India should step up its domestic usage if it wants to

increase maize production instead of relying on exports.

32

In a bearish scenario, India may also have to discount for quality too because of unhygienic

storage practices in Andhra Pradesh, Karnataka, Bihar, etc.

Demand for feed

Despite India’s growing prosperity of middle class, traditional demographic propensity is for

vegetarian diet.

Doubling maize demand as feed ingredient in short span may not be possible.

Should the production increase, Indian domestic prices will be resilient to adapt to market

dynamics.

Freely marketable

Maize trade is market-centric with least intervention from Government. Minimum Support

Price of this coarse cereal generally remains a paper price and only in rare cases and years,

the Food Corporation of India procures not more than half a million tonne. Even the inclusion

of maize/coarse grain in Food Security Act is thus of little relevance.

Export is completely free from any quotas/registration procedure. Prices are fairly transparent

in spot and future markets. Traders can trade as per their perceptions.

India-based MNCs can also hedge exposure both in India and through their parent

counterpart abroad. No doubt, India has to expedite building up safe storage/handling

capacities for ensuring quality premium on grains.

In this shackle-less environment which trade adores, additional export of about 3-4 mt (total

7-8 mt) of maize in world market of 115-120 mt can be realised in the short term whatever be

the demand-supply matrix of major competing nations even though India lacks economies of

scale at this point of time.

33

PULSES

Govt allows 291 tonnes of pulses export to Maldives till FY17(BS 31.3.14)

Although exports of pulses are banned, the Indian government ships the commodity to the

neighbouring country on diplomatic grounds

India has permitted exports of about 291 tonnes of pulses, the shipment of which is banned,

to Maldives till 2016-17 through public sector undertaking.

"Export of pulses to Maldives has been permitted for the years 2014-15 to 2016-17,"

Directorate General of Foreign Trade (DGFT) has said in a notification.

Although exports of pulses are banned, the Indian government ships the commodity to the

neighbouring country on diplomatic grounds, a source said.

Pulses exports are banned since June 2006 to augment the domestic supply and check prices.

India is the largest consumer of the foodgrain. The country imports pulses to meet the

domestic production shortfall of 3-4 million tonnes.

For 2014-15, 2015-16 and 2016-17, the government has allowed exports of 87.85 tonnes,

96.63 tonnes and 106.29 tonnes respectively to Maldives.

As per the government estimate, the country is expected to produce 19.8 million tonnes (MT)

of pulses this year, which includes 9.8 MT of chana crop, while trade figures says only 6.5

MT of chana crop this year.

Official figures show that India imported around 1.4 MT of pulses between April to

September 2013.

34

35

EDIBLE OILS /OILSEEDS

Export of oil meals from India down by 11 per cent in FY14 (ET 7.4.14)

The overall export of oil meals from India in the FY14 has been to the tune of 4,331,450

tonne as compared to 4,846,013 tonnes in FY13 - a drop of 11 per cent. In March 2014

India's exports of oil meals has declined by 8 per cent to 397,786 tonnes over the

corresponding period of the previous year. In value terms, there has been a marginal decline

of 3 per cent in FY14 to Rs 11,450 crore as compared to Rs 11,800 crore in FY13.

Oilmeal import by South Korea from India in FY14 is reported at 1,165,107 tonnes compared

to 907,082 tonnes last year consisting of 516,230 tonnes of rapeseed meal,

496,138 tonnes of castor meal and 152,739 tonnes of soybean meal.Iran imported

1,243,114 tonnes compared to 886,776 tonnes consisting 1,234,452 tonnes of soybean meal

and 8,663 tonnes of rapeseed meal.

Thailand imported 313,271 tonnes of oil meal compared to 450,360 tonnes of oil meal

imported in FY13. Vietnam imported 205,724 tonnes of oilmeal compared to 699,791 tonnes

in FY13 consisting of 29,796 tonnes of rapeseed meal, 797 tonnes of castor meal, 1,344

tonnes of groundnut meal, 82,777 tonnes of soybean meal and 91,010 tonnes of rice bran

extraction.

Rising stocks, slow exports to pressure palm oil prices (BL 14.4.14)

Despite the emerging scenario of weakening fundamentals, crude palm oil prices have held

well at Malaysia ringgit 2,650-2,750 a tonne levels in recent weeks, because of the dry spell

in South-East Asia and Brazil. The situation has been exacerbated by the looming threat of El

Nino.

Latest inventory figures from Malaysian Palm Oil Board are instructive. March-end palm oil

stocks were up 2 per cent month-on-month at 1.7 million tonnes (mt); and higher than market

expectation of 1.6 mt. Export data, too, are far from encouraging. March shipments were 8

per cent lower than the previous month and close to a fifth lower than in the previous year.

Aggregate exports in the last two quarters were down 10 per cent compared with similar

period the previous year.

Peak production season for palm oil begins by April. It is also the time when South America

soyabean starts to hit the market. Despite some weather-induced loss, the soya crop in Brazil

is still a record one at about 86 mt. Other oilseeds such as rapeseed and sunflower seed are

available in abundance.

This has resulted in palm oil’s discount to other oils considerably narrowing to about $70 a

tonne, making the former less attractive. The recently-released US planting intention report

suggests that soyabean acreage may expand by 7 per cent.

Subject only to normal weather, the US will harvest a record crop again. The same goes for

canola in Canada and rapeseed in Europe. In the second half of this year, the world may be

awash with oilseeds.

36

From the demand side, the sentiment is far from positive. Typically, during the summer

season of northern hemisphere (May to August), edible oil consumption declines.

The silver lining this year is the upcoming Ramzan festival in July which can create some

demand. Otherwise, major importing countries such as China and India have good domestic

harvests and decent levels of stocks.

So, going forward, crude palm oil prices are sure to come under pressure. The downside risk

to prices may manifest itself by the end of this month or early-May. A correction of 10 per

cent from the current levels may be on the cards.

To be sure, as of now, there is no clear evidence that El Nino will strike; but market

participants seem to assumed that the adverse weather phenomenon will eventually

materialise. Across agricultural commodities, prices have risen with sudden surge in

speculative capital flow.

Coffee, sugar, corn, wheat, soyabean and cotton prices have moved up 10-12 per cent in

recent weeks. Simply put, agri-markets are in the throes of weather-driven speculation. If and

when weather normalises, there will be a huge sell-off by speculators.

Groundnut oil production may touch 700k tones (BS 16.4.14)

The production has increased due to higher availability of groundnut for crushing

Production of groundnut oil may cross 700,000 tonnes this year in India following a bumper

output. In addition, lower export of peanuts have diverted the crop to crushing, which has

increased the oil production.

According to industry sources, India produces on an average 3,00,000 tonnes of groundnut oil

every year, but in this year, production of groundnut oil is likely to exceed 700,000 tonne.

"It is a fact that groundnut oil production has increased due to higher availability of

groundnut for crushing. Production of groundnut has almost doubled this year," said B V

Mehta, executive director of Solvent Extractors Association of India (SEA).

He said that over 700,000 tonnes of groundnut oil production is possible as most of the

groundnut crop has been diverted to mills for crushing.

Availability of both groundnut and groundnut oil has resulted in fall in prices of groundnut

and it may decrease further in the coming days, according to traders. Mehta said, "Groundnut

oil price has decreased constantly this year. We have asked the government to allow export of

the oil and are hopeful that the government will agree with us. Export will give some stability

to the market and farmers will get good price for their commodity." If government allows

export, India can export nearly 50,000 tonnes of groundnut oil.

In the past three months, price of groundnut oil has decreased by Rs 100 to Rs 690-695 per

10 kg in Gujarat. While, in retail market, price of groundnut oil (new tin) has declined by Rs

160 to Rs 1,275-1,280 per 15 kg.

Also, growth in consumption has given some relief to the groundnut mills of Gujarat which

are functioning normally. The reduction in prices of groundnut oil by around 36 per cent has

resulted due to rise in demand.

37

Suresh Kaneria, managing director of Kaneria Oil Industries said, "With fall in prices, people

who had diverted to other edible oils, mainly cotton seed oil, are now back to groundnut oil.

This has increased the consumption of the oil by 50 per cent in this year." There are about

200 groundnut oil mills in Gujarat. However, over the last two years, hardly 40-50 mills were

operational because of low production of groundnut, high prices and reduced demand of the

commodity.

Moreover, good export demand for peanuts had created scarcity of groundnut for crushing.

With rise in demand, more than 150-175 mills are in working condition.

The Solvent Extractors' Association of India recently issued kharif crop estimate of the

Central Organization for Oil Industry & Trade. The report stated kharif groundnut production

for 2013-14 would be 4.71 million tonnes as against last year's 2.62 million tonnes.

According to industry sources, low export is also one of the reasons for higher production of

groundnut oil.

A Junagadh based groundnut trader and exporter said, "Overall demand in international

market for groundnut is very poor. India's export has declined because of weak demand from

China. Moreover, some changes in export rules for groundnut has also depressed the export

demand from India."

As per Indian Oilseed and Produce Export Promotion Council (IOPEPC) data, during April-

September 2013, India exported 1,89,867 tonnes groundnut. In the corresponding period

previous year, India had exported 5,35,670 tonnes groundnut.

According to exporters, this year India's groundnut export could be around 4,50,000 tonnes.

38

39

MILK

Ice cream makers, FMCG cos & dairy suppliers building up inventories fearing El Nino

backlash (ET 26.3.14)

After the extended winter, a long summer with below-normal rainfall is on the horizon,

setting the stage for higher sales of ice creams, juices and soft drinks and prompting

companies to plan for higher purchases of fruit pulp and milk powder to meet higher demand.

This year's monsoon may be below normal as the El Nino phenomenon, which upsets rainfall

patterns due to changes in ocean temperatures, is likely to develop by the middle of the year.

At times monsoon rainfall has been normal despite El Nino, but it has often suffered.

Forecasts of El Nino are being keenly followed by all major seed, fertiliser, food processing

and FMCG companies. Many are already preparing for below-normal rainfall this summer as

foreign forecasters say the chances of El Nino have increased. Dairy suppliers such as Mother

Dairy and ice-cream maker Vadilal are building inventories of milk powder, while juice

manufacturers like Mango Sip are planning to increase purchase of mango pulp ahead of the

production season to ensure steady supply.

However, some companies such as Coca Cola feel that a good monsoon translates into higher

disposable incomes and higher spend on FMCG products. Vadilal hopes to gain like it did in

2012, when an extended summer increased sales of ice cream manufacturers by 30 per cent.

"Sales will definitely increase in a year with extended summer," said Rajesh Gandhi, MD,

Vadilal Industries. Ahead of the season, Vadilal has contracted over 1,100 tonne of milk

powder, an increase of 10 per cent from last year.

Fruit juice and concentrate manufacturers, who see 50-70 per cent of their sales in the April-

June quarter, expect sales to rise. "Rains in West and South India in March delayed summers

and we are hopeful to see a jump in sales in April-June this year," said Piruz Khambatta,

managing director, Rasna.

While a hot summer raises demand for thirst quenchers, Coca Cola is also concerned about

the impact of low rainfall on rural incomes. "From a business standpoint, a good monsoon

and a good harvest ensures prosperity for rural India, which then translates into higher

disposable incomes and higher spend on FMCG products. For a product that sells at Rs8 and

Rs10, it always helps when the consumer has that extra coin in his wallet. We therefore hope

and pray for a good monsoon and a good harvest," said a spokesperson of Coca-Cola India.

Companies are also concerned that raw material prices may rise. Vadodara-based Manpasand

Beverages, a supplier to Indian Railways, is planning to procure over 15 per cent more

mango pulp. "Even a delay of monsoon by a fortnight increases retail sales by over 10 per

cent. Harvesting of early varieties of mangoes has yet to pick up and prices look stable but it

is a volatile market," said Dhirendra Singh, MD of the firm. An official of a co-operative

dairy said there were concerns about milk supply.

"This year, the country doesn't have significant carry over stock of milk powder due to rise in

exports. Hence, we will have to prepare in advance for the summers," he said. Mother Dairy,

which markets about 3.2 million litre of milk a day in Delhi, Mumbai, Hyderabad and Gujarat

plans to procure over 4,000 tonnes of milk powder in the coming days. "India has deficit of

40

close to 10,000 tonne of skimmed milk powder this summer. These figures are based on

current assumptions of milk arrival and one needs to watch the progress of the summer and

monsoon," said Mother Dairy MD S Nagarajan.

Punjab State Co-operative Milk Producers' Federation too has issued a tender for requirement

of 1,000 tonne of skimmed milk powder this month. Agriculture ministry officials say the

government has asked all dairy co-operatives to stock up milk powder in the likelihood of a

long summer or delayed monsoon this year.

Amul eyes Rs 30,000 crore turnover by 2018-19 (ET 4.4.14)

The turnover of the Amul brand of milk and milk products crossed Rs 18,000 crore in 2013-

14 by jumping 32% from the previous year, leading the Gujarat Cooperative Milk Marketing

Federation to advance its target of achieving Rs 30,000 crore of annual sales.

The just-ended fiscal year's sales growth was the fastest in the history of the four-decade-old

dairy cooperative. Amul earned Rs 525 crore from exports during the year.

"We achieved this kind of growth by intensifying our efforts on milk procurement,

processing and expanding distribution network," the federation's managing director, RS

Sodhi, told ET. "We witnessed growth in demand for both our traditional and modern milk

products ranging from butter to Kool range of beverages," he said.

"In view of the market outlook, we are confident of achieving sales turnover of Rs 30,000

crore by 2018-19, ahead of our Vision 2020."

In 2013-14, the 18 district unions that form the federation procured an average 135 lakh litres

of milk each day, including 20 lakh from outside of Gujarat.

Andhra Pradesh clocks highest growth in milk production: Assocham report (FE

22.4.14)

Andhra Pradesh has recorded highest growth in terms of both milk production and per-

capita milk availability at over 41 per cent and about 36 per cent, respectively, during the

five year period of 2006-10, industry body Assocham said today.

Andhra Pradesh has recorded highest growth in terms of both milk production and per-capita

milk availability at over 41 per cent and about 36 per cent, respectively, during the five year

period of 2006-10, industry body Assocham said today.

However, the state ranked third in terms of milk production with over 1.1 million tonnes (mt)

milk produced annually, it said.

"Milk production across India has grown at a significant rate of about 19 per cent during the

aforesaid period with overall milk production crossing 121 mt mark as of 2010-11.

"But despite being the largest milk producer in the world, per-capita milk availability in India

at 252 grams falls below the global average of 279 grams per person per day," a study titled

'Unlocking the growth potential of Indian dairy industry' conducted by the Associated

Chambers of Commerce and Industry of India (ASSOCHAM) said.

41

New Zealand (9,773 grams), Ireland (3,260 grams) and Denmark (2,411 grams) are top three

countries in terms of per-capita milk availability.

Andhra Pradesh, Rajasthan (28 per cent), Kerala (24.8 per cent), Karnataka (24 per cent) and

Gujarat (23.7 per cent) are the top five states in terms of clocking high growth in milk

production in the country.

"It is imperative for India's dairy industry to streamline its value chain processes and integrate

the smallholder dairy producers into the processing value chain in order to improve the

overall performance of the industry. More so as they possess inherent strengths like low

production costs, lower liabilities and limited liquidity risk," noted the Assocham study.

However, lack of knowledge and technical know-how, poor access to support services,

limited access to credit and poor milk quality together limit the ability of smallholder dairy

producers to take advantage of market opportunities, it said.

Growing at a compounded annual growth rate (CAGR) of over four per cent, milk production

in India is expected to rise to about 177 mt by 2019-2020.

The growth rate would help in meeting the projected demand of 150 mt by 2016-17 that has

been envisaged in National Dairy Plan Phase-1," said D S Rawat, national secretary general

of Assocham while releasing the study.

The increase in the income level of an average Indian is being accompanied by a change in

the food basket as the monthly per-capita consumption expenditure on milk and milk

products in both rural and urban areas has grown significantly, the Assocham study said.

Uttar Pradesh (UP) commands highest share of over 17 per cent in total milk production

followed by Rajasthan (11 per cent share), Andhra Pradesh (nine per cent), Punjab (about

eight per cent) and Gujarat (about eight per cent) with a combined share of over 53 per cent,

it said.

Punjab has recorded highest per-capita milk availability of 937 grams as per latest available

data followed by Haryana (679 grams), Rajasthan (538 grams), Himachal Pradesh (446

grams) and Gujarat (435 grams).

Andhra Pradesh has recorded highest growth rate of about 36 per cent in terms of

improvement seen in per-capita milk availability followed by Kerala (21 per cent), Rajasthan

(20 per cent), Karnataka (19 per cent) and Gujarat (17 per cent).

"Concentration of milk production in some pockets together with high cost of transportation

has led to rising disparity amid states in terms of per-capita milk availability," noted the

study.

There is an urgent need to build up strategies to increase competitiveness in all segments of

dairy chain, input supply, milk production, processing, distribution and retailing, the

Assocham study said.

"For promotion of the dairy sector in India, emphasis now needs to be more on how to

involve and encourage the village population into proactively adopting dairy industry as a

viable alternative to the agricultural activity."

42

Promoting dairy entrepreneurship, strengthening economic viability of dairy farms,

increasing the link between rural production areas and urban markets and promotion of small

quantity packaging to meet the needs of poor are certain key areas highlighted by the study.

Milk production grows 19%, crosses 121 mn tonnes: Assocham (BS 23.4.14)

This finding was part of a study titled 'Unlocking the growth potential of Indian dairy

industry'

Milk production across India has grown at a rate of about 19 per cent during the five-year

period of 2006-10 and crossed 121 million tonnes (mt) as of 2010-11.

However, despite being the largest milk producer in the world, per capita milk availability in

India at 252 grams falls below the global average of 279 grams per person per day, according

to a study titled ‘Unlocking the growth potential of Indian dairy

industry,’ conducted by The Associated Chambers of Commerce and Industry of India

(Assocham).

New Zealand (9,773 grams), Ireland (3,260 grams) and Denmark (2,411 grams) are the top

three countries in terms of per-capita milk availability.

The study states that Andhra Pradesh (AP) recorded the highest growth rate of over 41 per

cent and about 36 per cent in terms of milk production and per-capita milk availability

respectively during the aforesaid period. The state ranked third in terms of annual milk

production with over 1.1 mt.

Apart from AP, Rajasthan (28 per cent), Kerala (24.8 per cent), Karnataka (24 per cent) and

Gujarat (23.7 per cent) are amid the top five states in terms of clocking high growth in milk

production.

Uttar Pradesh commands the highest share of over 17 per cent in total milk production

followed by Rajasthan (11 per cent share), Andhra Pradesh (nine per cent), Punjab (about

eight per cent) and Gujarat (about eight per cent), which are amid the top five states with a

combined share of over 53 per cent.

According to the study, it is imperative for India’s dairy industry to streamline its value chain

processes and integrate the small dairy producers into the processing value chain to improve

the overall performance of the industry.

“Growing at a compound annual growth rate (CAGR) of over four per cent, milk production

in India is expected to rise to about 177 mt by 2019-2020 and that would help in meeting the

projected demand of 150 mt by 2016-17 that has been envisaged in the National Dairy Plan

Phase-1,” Assocham secretary general, DS Rawat, who released the study, stated in a press

release on Tuesday.

The study highlights the increase in the income level of an average Indian is being

accompanied by a change in the food basket as the monthly per-capita consumption

expenditure on milk and milk products in both rural and urban areas has grown significantly

at about 92 per cent and 72 per cent respectively.

43

Dairy challenge from French quarters (BS 24.4.14)

Danone is intent on localising its products to prepare for entry of other foreign players

Soon Amul's shrikhand will see some competition from unlikely quarters. French dairy major

Danone is developing an India-centric portfolio to make a mark in the complex dairy market.

Having launched quintessential desi products like lassi (sweet yogurt drink), dahi (yogurt)

and chaas (spiced buttermilk) recently, the company is looking at products like shrikhand.

With a host of foreign dairy players such as Lactalis and Bongrain setting sight on the world's

largest milk-producing nation, Danone, which

entered in 2008 (at first, in a JV, and then solo), is trying to stay ahead of the pack.

"We want to establish Danone as the most-preferred premium dairy brand. Hence expanding

into local segments is important," Jochen Ebert, managing director, Danone Dairy, Danone

Foods & Beverages India, says, adding that its chaas, lassi and mishti doi (sweet yogurt) have

earned a positive response.

Brand experts feel that Danone is taking what is called the classic 'toe-hold' approach. "You

first bring products from overseas, and eventually develop products that cater to local taste. It

boosts visibility and reach, but not necessarily margins," explains Harish Bijoor, chief

executive of Harish Bijoor Consults.

The yogurt specialist is trying its hands at all things fermented. Having launched mishti doi, a

version of yogurt popular in eastern India, the company is now exploring another local yogurt

variant, shrikhand, that is popular in western India. "We are very open to look at more local

products," Ebert explains.

He adds, "India potentially is a very big market and it is the biggest producer and consumer

of milk. However, the per-capita-consumption of yogurts is still lower than in Europe or the

US. Including home-made dahi, it is about 1/10th of more mature dairy markets like France.

If we consider only packaged yogurts, this drops to about 1/100th. So, there is scope."

Even arch rival, Gujarat Cooperative Milk Marketing Federation (GCMMF) which markets

dairy products under the popular Amul, says that there is a shift towards dairy products from

the organised sector. R S Sodhi, managing director of GCMMF says, "Consumers are

preferring products from the organised sector."

Bijoor says, "There is scope for branded curd and lassi. Packaged formats is definitely

gaining popularity as 'loose' is no longer considered as wholesome."

Danone has refreshed its communication too, displaying new energy through social network

(taglines like When in 'Doubt, Drink more Lassi' or 'Keep Calm, Eat Aam' on Facebook) or

by signing a brand ambassador (Karishma Kapoor).

"Of the top 20 dairy companies in the world, seven have already set foot in India in some way

or the other. Many others are assessing the market, considering options to enter, although the

market here is very complex," says Shiva Mudgil, assistant vice-president (food and

agribusiness research and advisory), at Rabobank. Rabobank expects value-added dairy

products such to grow at 20-30 per cent in the next four-five years.

44

The world's largest dairy Le Groupe Lactalis, for example, has set foot in India. In January

this year, Lactalis had acquired South-India-based private player Tirumala Milk Products for

about Rs 1,750 crore. Lactalis develops well-known international brands such as President,

Galbani and Parmalat and is head-quartered in Danone's homeland France. Nestle already

retails its dairy products. The others making inroads include Bongrain and Schreiber.

An Euromonitor report on the dairy sector says, "Sour milk drinks and flavoured spoonable

yogurt are likely to emerge as preferred snacks among health-conscious consumers. The trend

would be supported by the increased visibility of yogurt and sour milk drinks in modern retail

stores. Additionally, many manufacturers are likely to make an entry into yogurt and sour

milk drinks to tap into the growing consumption."

Industry insiders says that Danone's local turn will open doors to the volume segment. A

Mumbai-based analyst says, "Danone has to make a choice between high-margin foreign

products and local tastes." Danone has launched creamy yogurt Cremix and Danette

smoothies, apart from flavoured yogurts.

The company is also expanding reach: "Today we have presence in five cities, Delhi-NCR,

Mumbai, Pune, Bangalore and Hyderabad, in all modern trade stores. In traditional trade, we

focus on the upper-end of the market where we can fully control cold chain and product

quality. In the beginning of next year, we will start to expand," Ebert says.

Market-leader Amul, is not yet worried. Sodhi says, "We not only have a pan-India presence

but enjoy a high market share. In branded lassis, Amul has more than 90 per cent share.

Danone still has limited distribution reach." Bijoor adds that distribution would unlock

further gains for the brand.

45

VEGETABLES – POTATO /ONIONS

New government may have to take timely decision to allow onion imports to avoid crisis

(ET 10.4.14)

Preparing a plan to avoid a repeat of the 2013 onion crisis is likely to be the first task for the

next Government. Uncertainty about the quantity and quality of onion that will go into

storage and fears of a below normal monsoon, as being hinted by forecast agencies, may lead

to a crisis worse than the one seen in the previous year, when retail prices touched Rs.100 per

kg.

Government agencies and trade sources tracking the essential vegetable estimate the loss to

the Rabi onion crop at about 10-15 % due to the hailstorm and unseasonal rainfall in key

onion growing states of Maharashtra, Madhya Pradesh and Karnataka in February

and March.

The new Government at the Centre may have to take a timely decision to allow imports to

deal with the situation, especially if the rainfall is deficient in the crucial sowing and

transplanting months of June and July. Considering that the area under onion is at a record

high - with farmers expanding the acreage following bumper prices in the previous year - a

15% loss will not impact the volume much.

However, doubts are being raised about the quality of the crop. A scientist from a

government research institute said, "The damage will be less if farmers have used the

prescribed Rabi varieties. Also, the damage is not much if harvesting takes place about 15-20

days after the rains." Rabi onion accounts for 60% of the total onion production of India.

Most of this is stored and used during the rainy season when there is no fresh harvest.

According to the first advance estimate, India is expecting 198 lakh tonne production in

2013-14 as against 168 lakh tonne in the previous year. Industry insiders claim that the

rainfall has damaged the shelf life. "More than the decline in volume, the fall in quality is of

more concern. A considerable part of the Rabi onion may not last longer than August, which

otherwise remains good till October," said Danish Shah, partner of Pune-based Sanghar

Exports.

Traders and managers of APMCs and farmers agree that prices will remain firm. But they are

not sure if they could reach the levels seen in 2013. Dilip Bankar, chairman, Pimpalgaon

APMC, said, "Prices will remain firm this year as storage in Nashik district will be less than

usual." Historical data suggest that prices increase between mid-September and November if

the Kharif crop is less or delayed. Last year, farmers stored less onion as the price was good

in June and July while the Kharif crop was also delayed.

There have been instances of clashes between farmers and traders due to the rejection of the

rain-damaged crop or due to the throwaway prices offered by traders. Quality onion is

expected to come to market only after a week. Quality onion is being sold in the range of

Rs.8 per kg to Rs.12 per kg, while the lowest quality is being sold at Rs.2 per kg to Rs.3 per

kg. Traders and exporters expect the prices to remain stable during the rest of the month. The

low quality crop coming to market is having only one layer of outer dried skin. Scientists

have recommended that farmers take up shade curing of onions for 15-20 days for the

46

development of more layers of skin, which raises the shelf life.

Onion prices rise about 40 per cent in a week (ET 19.4.14)

Brace up for an onion price hike again. Unseasonal rains and hailstorms in Nashik district

have pushed up onion prices by about 40% in a week at the country's largest wholesale onion

market, the Lasalgaon Agriculture Produce Market Committee (APMC),

In the district APMCs, the average wholesale onion prices, which were in the range of Rs 575

to Rs 801 a quintal on April 10, rose to Rs 750-Rs 1,011 on Thursday. In the retail market,

good quality onions were sold in the range of Rs 12 to 15 a kg.

Speaking to TOI, an official from the Lasalgaon APMC said: "The quality of onions has been

damaged due to recent hailstorms and unseasonal rains and only 40% of total arrival of the

produce in the last month was of good quality. But the quantum of good quality onions has

increased to 55% to 60% from this week and good quality onions are getting good prices.

This is the major reason behind the rise in the average wholesale onion prices."

Director of the National Agriculture Co-operative Marketing Federation of India, Changdeo

Holkar, said: "The farmers have started storing onions with the hope of getting better prices

in the future. The arrival is expected to continue till June 15, after which it will decline. By

June 15, the average wholesale onion prices are expected to be in the range of Rs 1,000 to Rs

1,300 a quintal."

Currently, the onions arriving in the market are from the summer harvest, and have a shelf

life of around seven months. Hence, the farmers are in no hurry to sell the produce and are

hoarding the produce. On the contrary, the shelf life of kharif and late kharif crop is around

just a month. So the farmers have no choice but to sell their commodity at the prevailing

market rates during the kharif season.

The average wholesale onion price at Lasalgaon was Rs 1,011 a quintal on Thursday, against

Rs 725 on April 10. The minimum and maximum prices were Rs 351 and Rs 1,443,

respectively, and around 12,000 quintals of onions were auctioned.

In Pimpalgaon, the average wholesale onion prices was Rs 921 on Thursday, against Rs 801

on April 10. The minimum and maximum prices were recorded at Rs 300 and Rs 1,590,

respectively, and around 9,500 were auctioned.

The average wholesale prices at Yeola was Rs 750 on Thursday against Rs 575 on April 10.

The minimum and maximum prices were Rs 200 and Rs 1,340, respectively and around

3,000 quintals were auctioned.

Vegetable prices rise by 10-20% as soaring temperature spoiling the crops (ET 19.4.14)

It seems that the election fever has also gripped the country's vegetable sector. Vegetable

prices in certain parts have started climbing as soaring temperature is spoiling the crop. Prices

of vegetables have appreciated by 10-20% in last 10 days with consumers in the north and

47

eastern India feeling the maximum pinch.

Talking to ET, Shriram Gadhave, president of All India Vegetable Growers Association, said:

"Production of vegetables has been normal, and so prices should remain steady in the month

of April. But in certain pockets of the country, prices of certain vegetables are going up

because of temperature is rising which is spoiling the vegetables.

May and June will be crucial for vegetables as there is every possibility of a major damage if

temperature crosses 40 degree centigrade and there is no rain."

In Delhi and adjoining areas, prices of green chillies, peas, beans, ginger, tomato, carrot have

shot up by 10-20%. Subash Chugh, owner of Azadpur-based Subash Vegetable Traders, said

some of the vegetables have become costly as the availability have gone down.

"At present, summer vegetables like ridge gourd and pointed gourd are a bit on the higher

side. Prices will cool off a bit when vegetables start arriving from Himachal Pradesh.

However, if temperature goes up, vegetables will be affected," said Chugh.

Traders from Chandigarh said that prices of common vegetables have gone up in last one

week.

"Most of the vegetables come from Maharashtra, Gujarat, Madhya Pradesh and Rajasthan,

but are spoilt by the time they reach here," said a trader.

Costlier vegetable prices had pushed up the retail inflation to 8.31% in March compared to

the 8.1% in February inching closer towards the double digit mark. Potato prices this year

will remain a concern for consumers this year. Patitpaban De, a leading potato trader from

Bengal, said: "Prices will touch Rs 17-18 kg current year.

This is because cost of marketing and storing have gone up significantly. And this is an all-

India phenomenon. At present, a kilo of potato is being sold at Rs 15.

Within a week, potatoes from cold storages will be released in the market, which is will be

costlier by Rs 2-3 per kg."

In the eastern India, prices of vegetables are rising because there has been no rains for more

than a month in the region. Satyabrata Mukherjee, chief patron of Fresh Fruit and

Vegetable Growers and Exporters Welfare Association of West Bengal, said that unless it

rains, prices of vegetables will start moving northward.

"In fact, summer vegetables are being sold at a higher price. There may be another upward

jerk in prices if the dry spell continues," he said.

48

49

SUGARCANE /SUGAR

Sugar export subsidies ‘will not cross $ 80 million’ (BL 26.3.14)

India clarifies at WTO; Australia demands withdrawal of sop as it will ‘distort trade’

India’s export subsidies on sugar announced last month will not exceed $80 million and is

essentially designed to encourage diversification away from white sugar to raw sugar, the

country has clarified to the World Trade Organisation.

This would translate into roughly 1.4 million tonne of subsidised sugar exports going by the

current exchange rate and the subsidy amount of ₹3,333 a tonne. Defending its action at a

recent meeting of the WTO Committee on Agriculture (CoA) where several members

including Brazil and Australia attacked the sops, India said the subsidies were aimed at

discouraging white sugar production of which there was a glut in the global market, a WTO

official told Business Line.

While the WTO does not allow any new export subsidies, some allowance is made for

marketing and transportation. There are disciplines in place for members to gradually

eliminate existing subsidies.

Drawing flak

Coming down heavily on India at the CoA meeting last Friday, Australia said the

₹3,333/tonne incentive payment is equivalent of 14-16 per cent of the world price and

threatens to seriously destroy trade as India is the third largest exporter of sugar. It demanded

that India immediately discontinue the subsidies.

World’s top sugar producer Brazil asked how India could justify the subsidies since there has

been no consensus to extend special provisions for developing countries.

Other members that questioned the subsidies include Colombia, the EU, Paraguay, Thailand,

El Salvador, Canada, the US, Pakistan and New Zealand.

The subsidy amount of ₹3,333 of raw sugar export announced by the Cabinet last month is

for exports made in February and March. Fresh calculations will be made for April based on

existing exchange rate.

Rising inventories

Meanwhile, India’s white sugar stock is on the rise.

At the beginning of the current sugar year (October-September 2013-14), stocks were at 8.8

million tonnes (mt).

Sugar output in the on-going year is expected to be 23.8 mt, according to industry estimates,

against a domestic demand of 22 mt.

India said that it would notify the subsidies to the WTO soon.

50

UP sugar output touches 5.5 million tones (BS 27.3.14)

During 2011-12 and 2012-13, the state sugar production had stood at 6.97 MT and 7.47 MT

respectively

Uttar Pradesh sugar output in the current 2013-14 cane crushing season has touched 5.53

million tonnes (MT).

During 2011-12 and 2012-13, the state sugar production had stood at 6.97 MT and 7.47 MT

respectively.

However, sugarcane arrears have reached a new high of Rs 7,875 crore with the private

sector mills accounting for the lion's share of the dues at Rs 7,350 crore.

The mounting arrears have become a major poll issue in the run up to the Lok Sabha election,

especially in western UP region. The political parties and leaders have been attacking the

incumbent Akhilesh Yadav government for failing to ensure timely payment of dues.

So far, the 119 operational mills had collectively crushed over 60 MT of cane. The recovery

percentage has shown marked improvement to 9.30% compared to 9.11% last year.

Recovery refers to sugar produced per unit of cane crushed and higher percentage means

higher output and consequently more profit margin to mills.

So far, UP mills had paid about Rs 5,863 crore to farmers against total dues of Rs 13,739

crore. The actual arrears are higher at Rs 15,450 crore. However, the state government had

allowed the mills to pay Rs 20/quintal of cane price by the end of crushing season.

This has collectively reduced their net liability by Rs 1,711 crore so far to Rs 13,739 crore.

During 2013-14, the UP cane price stands at Rs 280/quintal, wherein the millers have been

allowed to pay in installments of Rs 260 and Rs 20.

Earlier, the Centre had announced Fair and Remunerative Price (RFP) for sugarcane for the

next 2014-15 season raising it to Rs 220 / quintal from Rs 210/quintal for 2013-14.

Sugar output seen jumping as subsidy boosts exports (BS 28.3.14)

Production may gain 5% to 25 mn metric tons in the harvesting season starting Oct 1

Sugar output in India, the world's largest producer after Brazil, is set to climb for the first

time in three years as a subsidy for raw exports and abundant dam water spur farmers to

increase planting.

Production may gain 5 percent to 25 million metric tons in the harvesting season starting

October 1, said M G Joshi, managing director of the National Federation of Cooperative

Sugar Factories Ltd., which accounts for 48 percent of the national output. The area under the

crop will increase in Uttar Pradesh and Maharashtra, the biggest growers, he said.

Prospects for higher Indian output may halt a rally in raw-sugar futures in New York and

extend a global glut into a fifth year. A bigger Indian harvest will boost exports of subsidized

raw sweetener, bridging any potential decline in supplies from Brazil due to dry weather.

51

"Farmers are opting for cane even if they are getting lower prices this year as there is assured

demand and return for the crop," said Sanjeev Babar, managing director of Maharashtra State

Cooperative Sugar Factories Federation, which represents 173 mills. "Reservoirs are full and

good rainfall last year has improved moisture in soil."

India announced a cash subsidy for exports of as much as 4 million tons over two years and

interest-free loans to mills to allow them pay arrears to farmers. Producers including Bajaj

Hindusthan Ltd. and Shree Renuka Sugars Ltd. are betting on exports to prevent stockpiles

expanding from a five-year high.

Competitive Crop

Farmers will stick with cane as no other crop is as competitive, according to Avdhesh Mishra,

president of the Cane Committees' Association, a grouping of farmers. Even if payments are

delayed, farmers know that mills will clear the dues, he said by phone from Gorakhpur in

Uttar Pradesh yesterday.

Cane production in Maharashtra will probably jump 26 percent to 85 million tons in 2014-

2015, Babar said. Sugar output may climb 17 percent to 9 million tons if the monsoon is

normal, he said. Farmers planted the crop on 565,000 hectares as of March 19, compared

with 482,000 hectares a year earlier, Agriculture Ministry data showed. The area in Uttar

Pradesh was little changed at 1.22 million hectares, the data show.

"There is a turnaround in domestic sentiments after the government decided to subsidize

exports of raw sugar and a downward revision in output" this year, said Sudha Acharya, a

senior analyst with Kotak Commodity Services Ltd. in Mumbai. "The increased demand for

summer also pushed up prices. Besides, the global rally in prices due to weather woes in

Brazil helped Indian sentiments."

Rising Exports

Shipments from India may total about 2 million tons in the 12 months through September,

Acharya said. Exports totaled 1.3 million tons between October and February, compared with

full-year sales of 345,000 tons in 2012-2013, according to the Indian Sugar Mills

Association.

Futures in New York rallied 14 percent in February, the biggest monthly advance since June

2011. The contract for May delivery rose 2.3 percent to 17.36 cents on ICE Futures U.S.

yesterday. Futures in Mumbai climbed to 3,104 rupees ($52) per 100 kilograms today , the

highest since August.

Monsoon rainfall was the highest since 2007 last year, boosting water levels in the nation's

reservoirs, the India Meteorological Department estimates. Water levels are 24 percent above

last year, according to water resources ministry data.

52

Sweet news for millers as government signs sugar pact (ET 29.3.14)

Giving respite to the sugar mills, which are dealing with the problem of low sugar prices and

over production, Maharashtra government signed an MoU with the Maharashtra

co-operative sugar mills federation on Thursday to procure sugar for its public distribution

system (PDS) from the sugar co-operatives at the market rate for next three

months.

Sanjiv Babar, managing director, Sakharsangh said, "We are happy that the government took

this decision , which was our long standing demand." The government will buy 1.39 lakh

quintal sugar from the sugar co-operatives in April for PDS distribution. There will be a new

government in office in June, which will have to take the decision about making a permanent

arrangement for buying sugar for public distribution.

The central government had lifted the obligation on sugar mills to provide levy sugar at

subsidised rate for the government's PDS operations. The Maharashtra government in its

government resolution (GR) has said that it tried to get the sugar from the mills from the

quota obligation the mills had to fulfill at the time of its lifting.

It faced problem in procuring the pending levy sugar as mills moved the court. The

government could get only 2% sugar from the mills in January and could not get any sugar in

February. The state government had decided to procure PDS sugar from the open market by

e-tendering . The GR says that despite increasing the due date of the e-tender twice, it did not

get a single response except for the Gondia district, where it received three applications but at

higher than the market rate.

The memorandum of understanding (MoU) was signed between the department of civil

supplies and public distribution and Maharastra Co-operative Sugar Factories Federation

(Sakharsangh ) on Thursday. As per the MoU, the state government will procure sugar from

Sakharsangh for a period of five months from February to June, 2014, during which

period, it intends to complete the e-tendering process for open market purchase of sugar.

Sugar production dips 7% till March this year: ISMA (ET 3.4.14)

In the final leg of cane crushing in the country, the sugar production in the current season is

still lagging by 7% compared to the last season. Mills across the country have produced 215

lakh tonne of sugar till yet in the sugar season running from October 2013 to September

2014, said Indian Sugar Mills Association (ISMA).

Maharashtra has produced 70.1 lakh tonne of sugar, which is about 9% less than last year to-

date production of about 77.3 lakh tonne. 85 mills are still crushing against 42 in last year

during the same period. Till 31st March, 2014, total 621 lakh tons of sugarcane has been

crushed with anaverage of 11.3% recovery.

In Uttar Pradesh, where the mills suspended their operations for a month in November last

year, there is a fall of 13% in the production. The state has crushed about 628 lakh tonne of

sugarcane at 9.21% average recovery to produce about 58 lakh tonne of sugar.

53

"The fall in production is due to poor yields and higher diversion of cane to alternate

sweeteners manufacturing industry," said ISMA in statement.

Karnataka has produced 37.5 lakh tonne of sugar as against 33.6 lakh tonne during same time

last year. Whereas, Andhra Pradesh has produced 9.40 lakh tonne of sugar as

against 9.66 lakh tonne last year.

Sugar output during October 1-April 15 down 4% YoY: ISMA (ET 17.4.14)

Mills produced 23.15 million tonnes of sugar between Oct. 1 and April 15, down 4

percent from a year earlier, a producers' body said.

Mills had produced 1.54 million tonnes raw sugar by the end of March and of that

850,000 tonnes was exported, the Indian Sugar Mills Association ( ISMA) said

in a statement on Thursday.

In March alone, mills shipped 350,000 tonnes of raw sugar and they are likely to benefit from

the incentives announced by the government for the dispatches, it said.

India announced an incentive of 3,300 rupees per tonne for production of raw sugar for

exports as the world's second biggest producer of the sweetener tries to bring down its

stockpile by promoting exports.

In April and May, sugar exports are likely to total 350,000 to 400,000 tonnes, the association

said.

The world's biggest consumer of sugar is likely to produce 23.8 million tonnes in

2013/14, slightly lower than the 25.1 million tonnes produced a year ago.

Local sugar prices hit a 14-1/2 month high on April 4 thanks to the summer season when

demand for ice creams and soft drinks picks up. The election campaign has also propped up

prices.

Sugar exports: Industry restive over delays in subsidy revision (BS 17.4.14)

For February-March, the rate decided was Rs 3,300 a tonne; that for April-May was to be

announced in the last week of March

The target sugar industry is complaining about the unexplained delay by the government in

revising the subsidy for export.

In February, to encourage a reduction in the surplus stock, the government said it would

subsidise shipments, with the amount to be decided every two months, based on the

commodity’s price and the exchange rate. For February-March, the rate decided was Rs 3,300

a tonne; that for April-May was to be announced in the last week of March. However, this

has yet to be done.

“The delay is adversely impacting the physical shipment of exports already contracted,” said

Abinash Verma, director-general, Indian Sugar Mills Association (Isma).

54

Mills had exported 1.45 million tonnes of both raw and refined sugar in the first half of the

current season (the sugar year is October to September). Of this, 350,000 tonnes was shipped

in March.

Another 350,000–400,000 tonnes of both raw and refined sugar was expected to be

physically shipped in April and May. Up to March 31, mills had produced 1.54 mt of raw

sugar, of which 0.85 mt was despatched for export. A further delay in announcing the export

incentives could mean India missing the target of two mt this year, said Verma.

Isma says sugar production was 23.15 mt until April 15 in the current season, 4.3 per cent

lower than the 24.15 mt by the same time last year. It estimates total production at 23.8 mt

this year, compared to 25.1 mt in the previous season. Sugar mills havestarted gradually

shutting down production facility for the current season.

Govt to continue Rs 3,300 per tn sugar export subsidy to stay (BS 20.4.14)

Recently the CCEA had approved an incentive for export of four million tones of raw sugar

for two years

Government has decided to continue with the export subsidy of Rs 3,300 per tonne on raw

sugar shipments for the April-May period.

During February-end, the Cabinet Committee on Economic Affairs (CCEA) had approved an

incentive for export of four million tones of raw sugar for two years in order to help the cash-

starved industry to pay arrears to sugarcane farmers.

The export subsidy was fixed at Rs 3,300 per tonne for the February-March period. CCEA

had also decided to review the subsidy amount every two months depending on the rupee-

dollar exchange rate.

“The Food Ministry reviewed the subsidy amount last week and decided to continue with the

existing rate of Rs 3,300 per tonne for April-May as well. A notification will be issued soon,”

a government source said. As much as 400,000 tonnes of sugar are likely to be exported in

April and May.

Some shipments have already been dispatched and are in transit, according to the industry

body, Indian Sugar Mills Association (ISMA).

As per ISMA’s latest data, 1.45 million tonnes of sugar in both raw and refined form are

estimated to have been exported in the first six months of the current marketing year, which

started in October.

Of this, 350,000 tonnes of sugar were exported last month, the first month of the subsidy.

The country’s sugar output declined 4 per cent to 23.1 million tonnes till April 15 of the

2013-14 marketing year from 24.15 million tonnes in the same period last year.

Production declined in Maharashtra and Uttar Pradesh, the top two producing states, while

output in Karnataka was at a record following good rains.

55

Food Ministry starts review of raw sugar subsidy amidst WTO pressure (BS 23.4.14)

The review is aimed at reworking the amount of subsidy downside based on new rates of

benchmarks

The department of food has started a review of the Rs 3,300 crore raw sugar subsidy scheme

announced towards end of last calendar year, albeit maintaining that the scheme will continue

for remaining months till the new cabinet comes in place.

According to sources close to the development, the review is aimed at reworking the amount

of subsidy downside based on new rates of benchmarks - exchange rate tariff and

international prices which has substantially changed since the time when the scheme was

announced. However, till date the final notification for the scheme has not been released.

Sources said that the scheme can at least run for two months – April and May 2014 of which

more than 20 days of April 2014 are already over. The review follows strong objection raised

by the members of the World Trade Organization (WTO) stating that this will distort global

trade as India is the third largest exporter of sugar in the world. The subsidy was given for

promoting raw sugar export by Indian millers.

Meanwhile, the government of India has decided to strongly defend its stance on the raw

sugar exports on the ground that the export subsidy is not intended for exporters or industry

but for farming community or cane millers. According to sources close to the development,

the subsidy to be given for export of raw sugar will be passed on to the cane growers for

diverting the sugarcane produce from processing white sugar to raw sugar which is not the

usual practice in India. Explaining this, sources said, usually in India there is no demand or

consumption of raw sugar and the entire cane is processed for sugar or jaggery or mollases

etc. On the other hand, there is surplus stock of sugar in the country which is why the

sugarcane farmers are not in the position to get proper remuneration as the cost of production

is higher than the market price.

Therefore a conscious decision has been taken by the government to divert the domestic

production to the export market where the demand is for raw sugar and not processed sugar,

said sources. The subsidy thus is intended for helping the millers/ farmers to divert

manufacturing of sugar to raw sugar. Thus the concern of the world community is not correct

in stating that the raw sugar subsidy will distort the global prices as they are not intended for

the exporters but for the cane millers and farmers.

Last year, the Cabinet Committee on Economic Affairs (CCEA) has also approved Rs 6,600

crore interest-free loans to the sugar industry with interest subvention of 12% to be borne by

the Sugar Development Fund.

The loans will be provided by banks to sugar mills exclusively for making payments to

sugarcane farmers, including arrears. The loans are equivalent to the excise duty paid by the

mills in the past three years and the mills have to repay the loans in five years. These mills

could avail of a moratorium on repayment for the first two years. The decision was taken to

help the sugar industry tide over the cash crunch.

56

57

INPUTS

India's urea imports dip by 12% in 2013-14 (BS 8.4.13)

The country had imported 8.04 MT of urea in the entire 2012-13 fiscal, according to the

Fertiliser Ministry data

India's urea imports have decreased by 12% to 7.08 million tonnes (MT) of urea in the year

2013-14, due to carry over stocks from the last year.

The country had imported 8.04 MT of urea in the entire 2012-13 fiscal, according to the

Fertiliser Ministry data.

Urea is imported by three STEs (state trading enterprises) - Indian Potash Ltd (IPL), MMTC

and STC on behalf of the government to meet domestic shortfall. The country produces about

22 MT against an annual domestic demand of 33 MT.

In the year ended on March 31 this year, nutrient imported by IPL and STC has decreased to

2.54 MT and 0.74 MT, respectively as compared to 3.62 LT and 2.03 LT in the year 2012-13.

However, there was an over three-fold increase in imports by MMTC to 1.68 MT as compare

to .54 MT during the period under review.

Besides these three STEs, the government also imports urea from OMIFCO, which is a joint

venture project of IFFCO and Kribhco, with an offtake agreement.

According to data, the offtake of urea from Omiffco in the year 2013-14 has also increased to

2.12 MT against 1.83 MT in the year 2012-13.

A Fertiliser Ministry official said the demand was expected to rise this year as sowing area

rose on the back of good monsoon, but there was enough inventory of the last year which was

carried over.

Urea is provided to farmers at a fixed subsidised maximum retail price (MRP) of Rs 5,360

per tonne. The difference between the cost of production and MRP of urea is provided as

subsidy.

58

59

OTHER AGRI /FARM NEWS

Government says El Niño contingency plans ready (BS 27.3.14)

With rising worries about the El Niño climate effect this year, translating to less rainfall in

the monsoon season, the Union ministry of agriculture has suggested farmers sow short and

medium duration crops.

El Niño is the term for a band of anomalously warm ocean water temperatures that

periodically develop off the Pacific coast of South America. This affects weather patterns

through the world; one of these is a drier monsoon here.

Paddy (rice), maize and soybean are major kharif crops, sown largely in May-June for

harvesting in October-November. Commonly, paddy requires at least three or four spells of

heavy rainfall; the plant needs knee-deep water logging for good crop germination. A

deficiency of rain affects output badly.

“Anticipating less rainfall this monsoon, especially in the northeast region, we are preparing

for short-duration varieties of rice and other kharif crops, for which an advisory has already

been issued to the Central Research Institute for Dryland Agriculture,” said Jeet Singh

Sandhu, agriculture commissioner.

He

said contingency plans for less rain were

ready. The government has already

directed agencies to raise nurseries for rice,

have timely placement of inputs,

arrangement of seeds and other required

inputs, weekly video conferencing for

regular liaison and follow-up,

mobilising extension staff for field

deployment and regular monitoring of

crops. There are hybrid and stress-

tolerant varieties of paddy seeds from both

private and state agencies, which the

government tries to promote. These

varieties become ready in 60-80 days as

compared to 90-120 days of the

conventional varieties.

There are also short-duration varieties; one of moong, for instance, can be harvested over 60-

65 days as compared to over 90 days for conventional ones. The government says it will also

be focusing on seed treatment, weed management and irrigation at critical stages, with

additional fund releases.

Skymet, the private weather forecasting agency, has said it estimates a five to 10 per cent

deficiency of rain in India this year due to the El Niño effect, the latter resulting in

precipitation towards South America and sucking away of moisture from the Bay of Bengal.

It adds the distribution of rain across the country will not be uniform; it could be more in

some and less in others. Going by the historical evidence, India will witness 90-95 per cent of

60

the average rainfall this year as a whole, says Skymet.

“Indian agriculture is fragile. Farmers generally prepare sowing plans at the time of planting

of seeds. An advisory for sowing plans over two months in advance might create a distortion

among farmers and hit their annual incomes,” feels Madan Sabnavis, Chief Economist,

CARE Ratings.

Climate warming may hit India's food securiy system: Report (ET 1.4.14)

High levels of warming resulting from continued growth in greenhouse gas emissions may hit

India's food security system with a global report warning that the impact could be "more

severe" on the country' rice and maize production.

Like crops, the country's fisheries could also be negatively affected by climate change, says a

report of the Intergovernmental Panel on Climate Change (IPCC) released in Yokohama,

Japan.

It says that emissions of CO2 often are accompanied by ozone (O3) precursors that have

driven a rise in tropospheric O3 that harms crop yields.

"Elevated O3 since pre-industrial times has very likely suppressed global production of major

crops compared to what they would have been without O3 increases, with estimated losses of

roughly 10 per cent for wheat and soyabean and 3-5 per cent for maize and rice.

"Impacts are most severe over India and China, but are also evident for soyabean and maize

in the United States," says the report titled "Climate Change 2014: Impacts, Adaptation and

Vulnerability".

It says that climate trends like increase in air temperature and changes in monsoon pattern are

affecting the abundance and distribution of fisheries in river Ganga and its fishery resources.

"....In India, changes in a number of climate variables including an increase in air

temperature, regional monsoon variation and a regional increase in incidence of severe

storms have led to changes in species composition in the river Ganga and have reduced the

availability of fish spawn for aquaculture in the river Ganga....," it says.

A total of 309 coordinating lead authors, lead authors, and review editors, drawn from 70

countries, were selected to produce the report.

On livestock, the report says that climate change can impact the amount and quality of

produce, profitability and reliability of production of the dairy, meat and wool systems

primarily relying on fodders, grasslands and rangelands.

"Higher temperature would lead to decline in dairy production, reduced animal weight gain,

stress on reproduction, increased cost of production and lower food conversion efficiency in

warm regions.

61

"Disease incidence among livestock is expected to be exacerbated by climate change," adds

the report.

EGoM okays Rs 352 crore relief for 4 states to replant horticultural crops (ET 1.4.14)

The Centre will provide Rs 352 crore assistance to farmers for replanting horticultural crops

that were hit by untimely rains and hailstorms early this month in Maharashtra, Madhya

Pradesh, Karnataka and Rajasthan, a government source said today.

That apart, the Centre has decided to release Rs 92 crore to Karnataka for providing relief to

farmers who lost the rabi crops and homes to unseasonal rains, the source said.

"The Empowered Group of Ministers, headed by Agriculture Minister Sharad Pawar has

approved Rs 352 crore as relief for replanting and rejuvenation of damaged horticultural

crops in four states," the source said.

The funds will be released from the National Disaster Response Fund (NDRF). This would

be over and above the assistance that is already being provided as part of a scheme

under the National Horticultural Mission (NHM).

While the assistance of Rs 92 crore, to be released from NDRF, to Karnataka was

approved in a separate meeting of the High Level Committee, also headed by Pawar, the

source said.

Finance Minister P Chidambaram and Home Minister Sushil Kumar Shinde were present at

both the meetings.

On March 20, the EGoM had approved a financial assistance of Rs 1,351 crore to

Maharashtra and Madhya Pradesh for damage to the crops.

Unseasonal rains, winds and hailstorms early this month have affected rabi (winter) crops

like wheat, pulses, oilseeds and horticultural crops in the four states.

Global warming threat rises for India, says latest UN report (FE 1.4.14)

India's high vulnerability, exposure to climate change will slow economic growth, impact

health.

India's high vulnerability and exposure to climate change and global warming will slow its

economic growth, impact health and development, make poverty reduction more difficult and

erode food security, a new report by scientists said on Monday.

The latest report from the UN Intergovernmental Panel on Climate Change (IPCC) stresses

the risks of global warming and tries to make a stronger case for governments to adopt policy

on adaptation and cut greenhouse gas emissions.

"This is the most extensive piece of science done on climate adaptation up until now,"

Aromar Revi, one of the lead authors of the report, told a news conference. "The key issue as

far as India is concerned is vulnerability and exposure."

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The report predicts a rise in global temperatures of between 0.3 and 4.8 degrees Celsius (0.5

to 8.6 Fahrenheit) and a rise of up to 82 cm (32 inches) in sea levels by the late 21st century

due to melting ice and expansion of water as it warms, threatening coastal cities from

Shanghai to San Francisco.

Experts say India is likely to be hit hard by global warming. It is already one of the most

disaster-prone nations in the world and many of its 1.2 billion people live in areas vulnerable

to hazards such as floods, cyclones and droughts.

Freak weather patterns will not only affect agricultural output and food security, but will also

lead to water shortages and trigger outbreaks of water and mosquito-borne diseases such as

diarrhea and malaria in many developing nations.

"All aspects of food security are potentially affected by climate change including food access,

utilisation of land, and price stability," said Revi, adding that studies showed wheat and rice

yields were decreasing due to climatic changes.

The IPCC lead authors said India, like many other developing nations, is likely to suffer

losses in all major sectors of the economy including energy, transport, farming and tourism.

For example, evidence suggests tourists will choose to spend their holidays at higher altitudes

due to cooler temperatures or the sea level rises, hitting beach resorts.

India ranked as the most vulnerable of 51 countries in terms of beach tourism, while Cyprus

is the least vulnerable in one study which was examined by the IPCC scientists.

Extreme weather may also harm infrastructure such as roads, ports and airports, impacting

delivery of goods and services.

"The world has realised mitigation is absolutely critical and probably the most effective form

of adaptation but adaptation processes have to be accelerated, especially in ... lower middle-

income countries like India," said Revi.

El Nino may have a bearing on inflation: RBI (BS 2.4.14)

Other risks to inflation are uncertainty on minimum support prices, outlook for fiscal policy,

geo-political developments

Further softening of vegetable prices is unlikely and the impact of the El Nino weather

phenomenon on the monsoon could have an adverse bearing on inflation, the Reserve Bank

of India said today.

"Vegetable prices have entered their seasonal trough and further softening is unlikely...There

are risks to the central forecast of 8% CPI inflation by January 2015 stemming from a less-

than-normal monsoon due to possible El Nino effects," the RBI said in its first bi-monthly

monetary policy statement for 2014-15, which left interest rates unchanged.

Wholesale price-based inflation eased to a nine-month low of 4.68% in February, while retail

inflation slowed to a 25-month low of 8.1%.

"Excluding food and fuel, however, retail inflation remained sticky at around 8%. This

suggests that some demand pressures are still at play," it added.

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El Nino refers to the warmer-than-average sea surface temperatures in the central and eastern

tropical Pacific Ocean. This condition occurs every four to 12 years and had last hit India's

monsoon in 2009, leading to the worst drought in almost four decades.

Other risks to inflation are uncertainty on minimum support prices for agricultural

commodities and other administered prices, especially of fuel, fertiliser and electricity, the

outlook for fiscal policy, geo-political developments and their impact on global commodity

prices.

"The Reserve Bank's policy stance will be firmly focused on keeping the economy on a

disinflationary glide path that is intended to hit 8% CPI inflation by January 2015 and 6% by

January 2016," it said.

It said at the current juncture, it is appropriate to hold the policy rate, while allowing rate

increases undertaken during September 2013-January 2014 to work their way through the

economy.

"If inflation continues along the intended glide path, further policy tightening in the near term

is not anticipated at this juncture," RBI said.

RBI Governor Raghuram Rajan said there is still uncertainty over the actual impact of El

Nino on the June-September monsoon and agriculture output.

"It's not a given that El Nino will happen and it's not a given that food production plummets.

If food production plummets, it is not a given that inflation across the board will be high...I

don't think at this point we can anticipate precisely what will happen," Rajan said.

El Nino to coincide with monsoon: India Meteorological Department's Pune arm warns

of poor rains (ET 2.4.14)

India should brace for a weak monsoon season as El Nino conditions are likely to develop,

but before rains dry up, the ongoing wet spell will continue until June, weather scientists have

forecast, casting a shadow on the rabi harvest and the planting of summer crops such as

paddy

This is not the official monsoon forecast of India Meteorological Department (IMD), but the

outlook prepared by the Pune-based Regional Climate Centre, which is a part of IMD.

Forecasters from Australia, China, Korea and the US have issued El Nino warnings, but so

far the Indian weather office has rubbished the concerns as western propaganda to rattle

Indian markets.

Monsoon outlook is indeed sensitive for the economy and the market. Although the country

has sufficient stock of foodgrain, a negative monsoon adversely affects the entire

economy. In 2009, when an El Nino severely disrupted monsoon rains, India saw a

sudden burst of food inflation, which continued relentlessly for years, forcing the Reserve

Bank of India to keep interest rates high despite persistent protests by industry. Weak rainfall

in the country in 2009 raised global sugar prices to the highest in decades, and this year the

price of the sweetener in India, the world's second-largest producer, is already rising.

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The forecast said weak El Nino conditions, which often disrupt rainfall in India, may develop

by the middle of the year, coinciding with the June-September monsoon. "During the season

April to June, wetter-than-normal conditions are likely over most parts of India, Afghanistan,

north Pakistan, Sri Lanka and Bangladesh. However, during the season May to July, normal

to drierthan-normal conditions are likely over most parts of South Asia except extreme north

India, adjoining north Pakistan and north Afghanistan," it said.

"On the monthly scale, most of the countries of the region are likely to experience normal to

wetter-than-normal conditions during the first three months and drier-than-normal conditions

in July," it said.

The Regional Climate Centre has suffixed a caveat to its forecast: "The long range forecasts

presented here are currently experimental and are produced using techniques that have not

been validated. The content is only for general information and its use

is not intended to address particular requirements," it said.

The Australian Weather Office, widely respected for its forecasts, said the outlook for El

Nino had increased. "The El Nino-Southern Oscillation ( ENSO) remains neutral;

however, the chance of an El Nino occurring later in 2014 has increased. Climate models

indicate the Pacific is likely to warm in coming months, with ocean surface temperatures

reaching El Nino thresholds during the southern hemisphere winter," it said in its weekly

tropical climate update on Tuesday.

North India has seen unusually high winter rainfall in 2014. This has damaged apple and

almond orchards and raised concerns about the wheat harvest that gathers momentum in

April. IMD's latest forecast says more rains are likely. "Rain/thundershowers would occur at

many places over Jammu & Kashmir and at a few places over Himachal Pradesh and

Uttarakhand from (April) 5th onwards," it said.

Agri exports outpace other commodities' (BS 4.4.14)

The share in overall export basket rose to 10.66% in 2012-13 from 7.06% in 2009-10

Growth in India’s agricultural exports has

exceeded the rise in exports of other

products. Through the past few years, these

products have consistently seen a rise in

their share in the export basket, primarily

due to the huge stocks resulting from

bumper output, as well as favourable

government policies.

According to data from the commerce

ministry, in 2010-11, agricultural exports

stood at $17.35 billion, in 2011-12 $27.43

billion, in 2012-13 $31.86 billion and in the

first 11 months of 2013-14, it stood at

$29.3 billion.

During this four-year period, overall exports recorded 93 per cent growth. The share of

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agricultural commodities in India’s overall export basked rose to 10.66 per cent in 2012-13

from 7.06 per cent in 2009-10.

“Agricultural exports growth will continue in the future, too, with improved prospects and

favourable long-term policy support,” Commerce Minister Anand Sharma had said on the

sidelines of a Business Standard awards function here on Saturday.

Sharma said from now, basmati rice would incorporate the new Pusa 1121 variety. Various

promotional efforts in major importing countries made the Pusa 1121 variety a preferred

choice. Also, the Centre had signed free trade agreements with a number of agricultural

product-deficient countries. The government also allowed exports of foodgrains and other

agricultural commodities on a quota basis, with a positive response.

Recently, India had allowed limited exports of pulses to Maldives. It has already been

announced subsidy for sugar had resulted in a spurt in exports. Buffalo meat and guar gum

are other major products seeing significant growth in the export basket. Though guar gum

prices have fallen in the past year, its exports have risen in volume terms.

“The growth momentum in India’s agricultural exports is expected to continue in the next

few years, with an increased share of processed food, including mango pulp, dried and

preserved vegetables, meat and poultry items. Factors such as reduced transaction costs, time,

better port gate management and fiscal incentives contributed to this upward trend. With

continued focus on issues such as food safety and compliance with international standards,

we can surely reach new heights,” said Piruz Khambatta, chairman and managing director,

Rasna, and chairman, Confederation of Indian Industry’s national committee on food

processing.

According to the World Trade Organization, global export and import of agricultural and

food products stands at $1.66 trillion and $1.82 trillion, respectively, of which India’s shares

are 2.07 per cent and 1.24 per cent’, respectively. This indicates India is a net exporter of

agricultural products. The country ranks 10th in terms of global agricultural and food exports.

In recent years, the government’s policy impetus has provided stability to agricultural

exports. Given sufficient stocks of foodgrains in the central pool, the government has allowed

exports of wheat. Also, efforts have been taken to promote horticulture exports. “Though

these measures are in the right direction, a consistent long-term trade policy, with tariff in a

narrow band, might be required to acquire international presence in commodities, wherein it

has comparative advantage,” Economic Survey 2012-13 had stated.

Sharma said the government was working on a long-term policy for sustainable growth in

agricultural commodities. Currently, India is the world’s largest rice exporter and second, in

terms of wheat exports. Horticulture exports have also seen good growth. To achieve the

desired growth, “India needs to change the cropping pattern, with a larger focus on north

India”, Sharma had said.

R S Rawat, secretary-general, Associated Chambers of Commerce and Industry of India, said,

“The government must take policy reforms to support growth in agricultural commodities. To

achieve the $70-billion export target for 2017 will not be too ambitious, with the possibility

of policy implementation increasing productivity and promoting diversity of crops and

specialised items to meet specific demands abroad.”

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Among agricultural commodities, exports of basmati rice have risen 46 per cent to $3.47

billion in the first nine months of this financial year, compared with $2.37 billion in the year-

ago period. Exports of non-basmati rice rose seven per cent to $2.13 billion in the April-

December 2013 period from $1.99 billion in the year-ago period. Exports of dairy

products recorded 138 per cent growth in April-December 2013 at $435.93 million, against

$183.24 million in the corresponding period last year. Due to declining global wheat prices,

India’s realisation from wheat exports fell 5.24 per cent — from $1.24 billion to $1.17

billion.

Kharif plan 2014 lays out detailed contingency provision for weather aberrations (BS

4.4.13)

Plans for 449 districts in 23 states are ready, 5 drought prone states put on high alert

A detailed contingency plan has been prepared by the ministry of agriculture as part of Kharif

2014 planning for the states to meet different situations arising out of delayed /deficient

rainfall, prolonged spells of drought, excess rainfall etc.

According to officials, a combined meeting of state and central government has been held to

discuss the ensuing strategy. While contingency plans for 449 districts in 23 States are ready,

the states of Karnataka, Rajasthan, Andhra Pradesh, Madhya Pradesh and Maharashtra, which

have higher frequency of drought, have been put on high alert. These states have been asked

to be prepared with sufficient seeds of short duration varieties of kharif crops and timely

placement of inputs such as seeds and fertilizers.

The meeting also held crop-specific strategies for higher production of kharif rice, pulses,

coarse cereals and oilseeds. Officials said that there is a problem of shortage of soyabean

seed as the availability is lower by about 7 lakh quintals as compared to their requirement. In

order to augment availability of soyabean seed, various initiatives have been suggested to

create awareness campaign, identification of farm saved seeds, and use of seed planters and

dibblers.

As an overall strategy, the planning for Kharif 2014 has to focus on eastern India for cereals,

crop diversification in North-Western Region and coverage of higher area under pulses and

oilseeds along with adequate administrative and financial back up to farmers

There are proposals of subsidy to given to replace old varieties of paddy with hybrid rice, use

of farm saved seeds and drum seeder in Uttar Pradesh, to promote direct seeded rice in

Jharkhand, hybrid rice cultivation in Odisha, zero tillage of rice in West Bengal.

More area under millets is one of the main agenda for Kharif 2014. The Centre for excellence

for millets established in Tamilnadu has been given the mandate for increasing acreage under

irrigated maize and productivity enhancement by use of millets/maize boosters should be

promoted and rice area should be diverted in maize in Haryana. Officials said s per the plan,

for enhanced production of millets, detailed plan has been suggested to states. As per the

plan, there is a need to popularize foxtail millets under rainfed conditions and rice fallow ragi

where pulses could not be grown in Tamilnadu; single cross hybrids maize for higher

productivity and quality protein maize in Jharkhand. Towards this, subsidy at the rate of 75

per cent of the total cost of the production will be given to develop hybrid maize in Jammu

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and Kashmir, Rajasthan and Madhya Pradesh.

As a plan to cut down loss in production of current Rabi crops due to likely spells of sporadic

rains, states have been suggested o ensure that after harvesting the produce is immediately

shifted to a warehouse or a protected area. This could be done through proper utilization of

rural godown facilities available at primary level cooperative society, promotion of FPOs &

PPP model for procurement, pledge loan facilities to farmers by negotiable warehouse receipt

at mandi level and availability of godown under state warehousing corporation be made to

farmers on priority.

Rural India tops consumption charts (BS 4.4.13)

For the first time since 1991, consumption in rural India has grown at a faster pace than in

urban areas

The United Progressive Alliance (UPA) is often accused of playing the party-pooper in urban

India. But the current economic mood in rural parts of the country, it appears, is the best in

the past 20 years.

During the UPA government’s second term in office, rural India’s consumption expenditure

grew at a faster pace than urban India’s — for the first time since 1991. From 2007-08 to

2011-12, the monthly per-capita consumption expenditure (MPCE) in rural areas increased at

a compound annual rate of 16.7 per cent, compared with 15.6 per cent in urban centres,

shows the consumer expenditure survey of the National Sample Survey Organisation

(NSSO). In the previous three years, rural consumption had risen at a CAGR of 11.4 per cent,

against 11.8 per cent for urban areas.

The trend was visible across the country, with 15 of the 17 major states reporting faster

consumption growth in rural areas. Haryana and Uttar Pradesh, though, were an exception. In

Gujarat and Maharashtra consumption demand was similar in both rural and urban parts.

The NSSO survey, conducted every five years or earlier, captures household monthly

expenditure on food, tobacco & intoxicants, fuel, conveyance, clothing, bedding, education,

medical services, rents, consumer durables, personal care and house construction.

The latest round of the survey shows that urban consumption expenditure rose 86 per cent in

2011-12, a slower rate than the 92 per cent seen in 2007-08 and 63 per cent in 1993-94 (the

first consumption survey after the economic reforms of 1991). This trend is a departure from

the one observed since the reforms.

In many states, the gap between urban and rural consumption has closed at a very fast pace.

In Bihar, for instance, rural consumption has increased at a CAGR of 17.2 per cent, against

8.2 per cent in urban areas.

In Chhattisgarh, rural spending rose at 15.3 per cent (urban 5.6 per cent) and in Odisha at a

CAGR of 15.7 per cent (urban 7.8 per cent).

Robust demand growth in villages has helped makers of consumer goods beat the economic

slowdown and sagging sales due to weakening consumer confidence in urban India. Since

2005-06, the combined net sales for India’s top 25 consumer goods companies has risen at a

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CAGR of 16.3 per cent — more than double the pace seen in the previous five years.

The previous time these companies reported a sustained double-digit topline growth rate was

between 1990-91 and 1998-99. Some of the companies in the sample are ITC, Hindustan

Unilever, Asian Paints, Colgate Palmolive, Nestle, Dabur, Britannia and Pidilite (see chart).

“Rural demand has been the key growth driver for us and it has spared our blushes from an

otherwise lacklustre demand scenario in urban areas in the past few years,” says Jyothy Labs

CEO S Raghunandan, who expects the trend to continue. Jyothy has stepped up marketing

and sales & distribution efforts at rural centres and in smaller towns to take advantage of this

growth opportunity.

The story for cement makers is similar. “There has been a big boom in construction of houses

in villages and smaller towns. This has sustained the overall demand, despite a construction

slowdown in large cities,” says Ashok Bhandari, chief financial officer of Shree Cement, one

of the top cement makers in North India. The company has appointed nearly 25,000 dealers

in Rajasthan, its home market. It has now forayed in Bihar as well.

Among automobile products, two-wheelers continue to report growth, even as car makers

have been hot by a fall in demand. Motorcycles, especially the entry-level 100-cc ones, have

become the preferred mode of personal transport.

Food continued to be the biggest item of spending, accounting for 53 per cent of an average

rural Indian’s household consumption during 2011-12. This included 10.8 per cent for cereals

and cereal substitutes, eight per cent for milk & milk products and 6.6 per cent for vegetables.

Among non-food items, fuel for cooking and lighting accounted for 8 per cent, clothing and

footwear for seven per cent, medical expenses for 6.7 per cent, conveyance and other

consumer services four per cent each and consumer durables 4.5 per cent.

For an average urban Indian, 42.6 per cent of the value of household consumption was

accounted for by food, including 6.7 per cent by cereals and seven per cent by milk & milk

products.

Economists attribute the surge in rural consumption to the UPA policy of putting more cash

in the hands of rural residents through higher minimum support price for food grains and

higher wages under the Mahatma Gandhi National Rural Employment Guarantee Scheme

(NREGS). “There has been a steady rise in the minimum support price for wheat and paddy

(rice) over the past five years. This has provided higher income to farmers. Besides, wages

under NREGS are linked to inflation; this put a floor to wages and boosted income for daily-

wage earners,” says Madan Sabnavis, head economist at Care Ratings. As rural households

have higher propensity to consume, higher income has translated into greater spending.

The trend has been aided by a rise in share of non-farm activity in rural economy. “Rural

economy is no more about farming. Nearly half the rural income is accounted for by non-

farm activities like construction, retail, repairs, transport, communications and financial

services. Their importance continues to rise as core agriculture sector has done well and the

government has been supportive,” says Devendra Pant, chief economist at India Ratings.

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About 40 per cent foodgrains stored unprofessionally: Assocham (ET 9.4.14)

About 40 per cent of government's foodgrain is stored in an "unprofessional" way due to

acute shortage of storage capacity to the tune of 35 million tonnes, industry chamber

Assocham said today.

Currently, 70 per cent of the total warehousing capacity of 112 million tonnes is owned by

the government.

Additional 35 million tonnes of storage capacity is required in the 12th Five Year Plan (2012-

17) period, it said.

"About 30-40 per cent foodgrain is stored in an unprofessional manner during the peak

marketing season in India," said a joint Assocham-Yes Bank study.

There is a dearth of foodgrains storage capacity of about 35 million tonnes and there is an

urgent need to augment modern and scientific storage facilities to keep pace with the

marketable surplus, it said.

Due to inadequate storage capacity and inefficient logistics, Assocham General Secretary D S

Rawat said that "around 20-30 per cent of total foodgrain harvest is wasted. ... Each grain bag

is handled at least six times before it is finally opened for processing."

To build additional storage capacity, he emphasised upon the need to renovate existing

warehouses and implement a robust Negotiable Warehouse Receipt (NWR) system.

The study also said that only 12 per cent of the total warehouse capacity accounts for

agricultural commodities, while the maximum is industrial warehousing.

The warehousing market, which is growing at 9 per cent annually, is expected to cross the Rs

35,000 crore market in the 2015-16 fiscal, it said.

According to Assocham, warehousing is the backbone for developing trade and commerce

and agro-processing industry, as it plays a very crucial role in strengthening agricultural

supply chain, ensuring food security and price stabilisation.

Besides, it also solves the problem of glut and scarcity by maintaining uninterrupted supply

of agricultural commodities in off season, it added.

More than 70% chances of El Niño this year: Meteorologists (BS 9.4.13)

In India too, El Niño might have a negative impact on the southwest monsoon, expected to hit

the mainland around June

The chance of an El Niño weather phenomenon developing in 2014 now exceeds 70 per cent,

Australia's Bureau of Meteorology said on Tuesday, raising the prospect of damaging floods

and droughts across the globe.

In India too, El Niño might have a negative impact on the southwest monsoon, expected to hit

the mainland around June. In the past decade, 2002, 2004 and 2009 were the drought years in

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India, due to emergence of El Niño .

"It is now likely an El Niño will develop during the southern hemisphere winter," the

Australian weather bureau stated on Tuesday. However, it qualified that it has still early to

determine the strength of the current El Niño.

Reuters said a strong El Niño in India would trigger lower production of summer crops such

as rice, sugarcane and oilseeds. India is the world's second largest producer of rice and wheat.

El Niño emerges after a gap of every three to seven years and affects rainfall in India during

monsoon. The heat off the western coast of South America increases the sea surface

temperatures above normal by 0.5 degree Celsius, affecting formation of rain-bearing clouds.

Govt to expand irrigation to cut reliance on monsoon (BS 14.4.14)

Will boost grains output and exports too

Plans are on to expand India's farmland under irrigation by at least a tenth in the next three

years, potentially boosting grains output by an equal proportion in the world's second-biggest

rice and wheat producer, a top government official told Reuters.

The extra irrigated area would cut the dependence on annual monsoon rains that water crops

grown on nearly half of the country's farmlands. Rice, cane, corn, cotton and soybean are the

main monsoon crops.

Crop yields on irrigated farms are usually 2-2.5 times those in rain-fed areas. Better yields

would boost exports after India shipped large quantities of rice and wheat in recent years.

"We have around 97 million hectares under irrigation and it's slated to go up by 10% by

2017. Eventually, the potential is to take this forward by almost half to 149 million hectares,"

A B Pandya, chairman of the state-run Central Water Commission, said in an interview on

Monday.

Higher output and productivity will also raise rural income, stoking demand for an array for

consumer goods ranging from lipsticks to refrigerators.

Although agriculture's share in India's nearly $2 trillion dollar economy has steadily fallen to

14%, the sector continues to employ more than half of its 1.2 billion people.

If India manages to realise its irrigation potential, almost three-quarters of its 199 million

hectares of arable land would be irrigated, leaving just a quarter dependent on monsoon rains.

RESERVOIRS NEEDED

A wide range of geographies, climatic conditions and crop patterns will prohibit India from

raising irrigation facilities beyond its optimum potential of 149 million hectares.

"I don't have an answer when are we going to realise our full irrigation potential. To realise

that potential, we need new reservoirs to raise storage capacity to 450 billion cubic metres

from the current 250," Pandya said.

It would cost around Rs 10,400 billion ($173 billion) to boost reservoir capacity, he said.

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While there is no dearth of resources, issues such as land acquisition, resettlement and

environmental clearances remain a prickly problem in building new reservoirs, said Pandya

and his colleagues at the Ministry of Water Resources.

A number of mining and industrial projects, including POSCO's $12 billion Indian steel plant

have been stuck in a quagmire of legal and environmental procedures.

Also, there has been stiff opposition to big dams in India that Pandya believes is a major

constraint in realising the country's true irrigation potential.

"The voluntary groups that are opposed to dams try to couch their argument in a way that

looks scientific but their basic assumption is wrong," he said.

A major project to construct dams in the upper Yamuna has been stuck for the past 20-30

years, Pandya said, referring to the river that flows through the capital New Delhi.

Agriculture may become more resilient because of the extra area under irrigation but the

monsoon will continue to play a major role in supporting farmers' income and replenishing

reservoirs.

Heavy rains at the tail end of the last monsoon season have ensured water levels at 42% of

total capacity in India's main reservoirs, a fifth higher than a year earlier and a third more

than the 10-year average.

"More than satisfactory water levels at our reservoirs are very reassuring, especially when the

new monsoon season is just round the corner," Pandya said.

($1 = 60.12 rupees)

Rice & sugar to the rescue, even as overall exports stagnate (FE 23.4.14)

Exports of farm items and allied products accounted for 14.4% of the country’s exports (of

$312.35 billion) in FY14

Even as India’s overall exports are crawling, exports of farm items that have seen a

phenomenal rise in recent years are keeping pace and increasing their share in the country’s

foreign trade. Exports of farm items and allied products accounted for 14.4% of the country’s

exports (of $312.35 billion) in FY14, compared with 13.9% in FY13 and 12% in the previous

year. While a sustained rise in exports has been in evidence for the last two to three years in

respect of many farm products, rice and, of late, raw sugar exports accelerated further.

India’s merchandise exports witnessed a drop in four out of the 12 months in the last financial

year, and the annual growth was a mere 4% despite a low base (exports declined 3.2% in

FY13). While a sharp increase in demand from the US and some countries in West Asia,

Africa and Europe has led to a 29% annual increase in rice exports in FY14 to R42,668 crore,

the country’s raw sugar exports jumped dramatically in the first half of the current marketing

year that started on October 1.

India, the world’s second-largest sugar producer and the biggest consumer, exported 1.45

million tonnes of both raw and refined sugar during the October-March period (valued at

close to R4,000 crore), compared with just 35,000 tonnes a year before. This time around, the

jump in exports of sugar, which have traditionally been influenced by inconsistent

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government policies, was partly because mills scrambled to cash in on a subsidy for raw

sugar production and also to reduce a glut in refined sugar.

As for rice exports, the demand for basmati, which accounts for over 65% in the overall value

of export of this grain, is mainly from Iran, Saudi Arabia, the UAE, the US and Europe. Non-

basmati varieties are in great demand in some African countries, including Benin, Senegal

and South Africa, besides the US. That per-unit export realisation has also risen is evident

from the fact that the increase hasn’t kept pace with the rise in rupee value of exports. Rice

exports reached 10.4 million tonnes last fiscal, only marginally higher than shipments of 10

million tonnes in FY13.

Rice exports, in fact, have been rising steadily since the government lifted a 4-year ban on

non-basmati rice exports in September 2011.

What triggered the export boom is also a relatively stable and liberal policy regime in recent

years when it comes to shipment of farm products. There has been lesser instances of a

sudden imposition of bans and restrictions on farm items in recent years.

Also, processing and packaging has improved, resulting in importers accepting the standards

of Indian products. Indian exporters of grain, meat products, guargum and fruit and

vegetables have gained the confidence of consumers in many countries.

“The sharp rise in demand from Iran and devaluation of the rupee against the dollar has

helped the country's export earnings,” Vijay Setia, former president of the All India Rice

Exporters Association (AIREA) and an exporter, told FE. Setia said the export of basmati rice

would have increased by an additional 2-3 lakh tonne in the last fiscal if imports by Iran had

not slowed down during the last few months of the year. Commerce ministry sources said that

Iran in a bid to curb further rice import for protecting domestic growers have put stringent

sanitary restrictions on Indian exports.

“While it is great to see India emerging as the largest exporter of rice, we should remember

part of this is due to highly subsidised water, power and fertilizers. Exporting a kg of

common rice is like exporting 3,000-5,000 litres of water. I would suggest a 5% export duty

on common rice to recover part of that scarce water/power," said Ashok Gulati, chair

professor–agriculture, Indian Council for Research on International Economic Relations.

“Sugar mills exported in large volumes to cut a glut in the domestic market following a fourth

straight year of surplus production. Raw sugar exports did particularly well in March as the

government incentivised its production and, thereby, exports as the sweetener variety is

hardly consumed domestically. The exports will get a boost if the food ministry announces

the subsidy for raw sugar production for April and May immediately, without delay,” said

Abinash Verma, director general of the Indian Sugar Mills Association.

Free market helps cereal exports, but tax on input-intensive commodities needed

(ET 24.4.14)

Could anyone have imagined even five years ago that India would be exporting 22 million

tonnes (mt) of cereals in 2012-13? But that is precisely what has happened. Not just that, in

2013-14, India exported 18-20 mt of cereals. So, in two years, India exported more than 40

mt of cereals — essentially rice, wheat and corn — which it has never done since

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Independence, and probably not even in its entire written history of more than 3,000 years.

On top of this largest-ever export, Indian granaries are overflowing, with public stocks

touching 80 mt in July 2012 and 74 mt in July 2013.

This is all the more surprising, especially when in 2006-07, India had imported 6 mt of wheat

and had banned export of wheat and common rice in October 2007 in the wake of rising

global food prices. Then how did the panic and cereal deficit turn into huge export and

surplus of cereals in just five years?

Mission Food Security

The answer lies partly in the National Food Security Mission that India launched in 2007

with an objective to increase food grain production by 20 mt — rice 10 mt, wheat 8 mt and

pulses 2 mt — over the following five years. It gave priority to delivery of better seeds and

farming practices in hitherto untapped areas of eastern, central and southern India. The result

was dramatic: India increased food grain production by 42 mt in 2011-12 over 2006-07.

But was this only a technological catch up? If so, why did it not spread earlier as there was

nothing really new in the seeds? The answer lies in a conducive price environment. Despite

ban on export of wheat and rice, the minimum support prices (MSPs) for wheat and paddy

(rice) were raised by more than 30% in 2008-09 over 2007-08. This was partly to catch up

with global food prices. This changed the incentive structure for wheat and rice dramatically,

encouraging farmers to increase production and productivity.

Tallest Grain Mountain

Increased irrigation in Madhya Pradesh and additional bonus on wheat by about 11% in later

years helped increase wheat production in MP, and a much higher bonus, by more than 20%,

for paddy in Chhattisgarh also had a similar impact. This production was rising fast and in the

face of banned exports till September 2011, it led to massive accumulation of stocks with

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public agencies touching unprecedented levels — more than 80 mt as on July 1, 2012 — in

Indian history.

With the opening up of export of wheat and common rice in late 2011, cereal export

increased just as water gushes out of a reservoir when sluice gates are opened. So far, our

pricing of rice, wheat and corn is globally competitive and that's why their exports have been

booming. But with expected moderation in global prices of corn and rice particularly, the gap

may be closing fast.

What are the lessons we learn from this? First, farmers respond to price signals strongly and,

therefore, price policy is as important as is the technology policy for cereals. The best way is

to let the prices be determined by free play of market forces in an open economy

environment.

But for this to happen, we need to free up exports from bans. Export bans lead to unnecessary

accumulation of stocks with government agencies on one hand and contribute to further

spikes in global prices, especially of rice, on the other.

Unplanned Outcome ..

Second, extra bonus by certain states on top of central MSP leads to more cereal-centric

production baskets, making the natural process of diversification towards high-value

agriculture more difficult. This is not in the best interest of farmers or society as it makes

exports uncompetitive — remember the case of

Thailand in rice — and leads to de facto state takeover of trade, further contributing to

accumulation of stocks with public agencies.

Third, in case of rice exports, we must remember that rice is a water intensive crop — one kg

of rice requires

3,000-5,000 litres of water — and water and power are highly subsidised in this country

despite scarcity of both the inputs. Ten million tonnes of rice export amounts to exporting 30-

50 billion cu m of water. Should that not be recovered by rationalising subsidies on water and

power?

However, in this season of political contests, who will bell the cat? May be we should recover

this through 5% export tax on rice for conserving our scarce water resources.

Most parts of India should prepare for below-normal monsoon rains in 2014: IMD

(ET 24.4.14)

Most parts of India should prepare for below-normal monsoon rains this year, Pune-based

Regional Climate Centre (RCC) of the India Meteorological Department (IMD) has said in its

forecast for South Asia.

It has forecast deficient rainfall in South Asia as a whole, and indicated that rainfall would be

below average in close to 80% of the country. The prediction as made a day before the

official monsoon forecast of the IMD is scheduled to be released. RCC has

observed that this year there is consensus about the prospects of El Nino phenomenon which

has often disrupted monsoons in the past.

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"Below normal rainfall is likely over broad areas of western, central and southwestern parts

of South Asia and some areas in the northeastern most parts of the region. Normal rainfall is

likely over broad areas of northwestern and eastern parts and some island areas in the

southernmost parts of the region," said DS Pai, head of India's Long Range

Forecast.

The forecast indicates that most parts of India will have below normal monsoon except the

eastern parts of Uttar Pradesh, North Eastern states, West Bengal, Odisha, Andhra Pradesh

and parts of J&K and Punjab. The RCC has used a large number of statistical and dynamical

models to generate forecast for the region. Many countries in South Asia did not have time

series data of rainfall and other climatological parameters, while some countries like

Afghanistan struggle to get even the internet connection.

Has the UPA Govt over-estimated foodgrain production? (BL 24.4.14)

Lower market arrivals raise questions

Even as the UPA-II regime prepares to sign off with the country’s foodgrain production

projected to touch a record 263.2 million tonnes (mt) in 2013-14, question marks are now

being raised on these estimates.

A key source of the doubts being expressed by some analysts relates to the trend in market

arrivals, especially with regard to paddy. The Agriculture Ministry has estimated rice output

to be at an all-time-high of 106.19 million tonnes (mt), as against 105.24 mt for 2012-13.

But this is not being reflected in the official data on arrivals in the mandis. The current

marketing season, which runs from October to September, has seen only 49.9 mt of paddy

arrivals till now, which is below the 52.7 mt for the same period in 2012-13.

Arrivals have fallen in all major States, barring Chhattisgarh (see table).

Even for wheat, where the marketing season starts from April, the cumulative arrivals so far,

at 11.52 mt, have been less than the 15.77 mt during the corresponding period last year. This

year’s wheat crop, too, has been officially placed at 95.6 mt, against 93.51 mt for 2012-13

and the previous record of 94.88 mt in 2011-12.

“In wheat, one could at least say that harvesting has been delayed due to unseasonal rains.

But this cannot apply to paddy, where the marketing season started in October. The higher

production should have therefore been reflected in market arrivals by now,” said a trade

source.

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Asked about this, Agriculture Commissioner JS Sandhu said: “We are aware of the lower

market arrivals trend”. However, he maintained that it wasn’t indicative of any production

decline.

“There was some crop damage in Odisha and Andhra Pradesh because of the cyclone and

excess rains. But overall acreage was more this time. Besides, we expect the rabi paddy crop

to be higher,” he added.

Sandhu attributed the lower mandi arrivals to off-market purchases from farmers by rice

mills, a view also echoed by Ashok Gulati, former Chairman of the Commission for

Agricultural Costs and Prices. According to him, millers were probably contracting directly

with farmers to cater to demand from exporters.

“In Chhattisgarh, the State Government has announced a ₹270/quintal price over and above

the Centre’s minimum support price of ₹1,310 for common-grade paddy. As a result, all the

grain there is coming to the mandi, unlike in States,” Gulati told Business Line.

But if foodgrain production turns out lower it would be unusual, given that 2013-14 saw India

receiving above-normal rains unlike what is being projected for the current year.

Overall rain was surplus not only in the main monsoon season from June-September (plus 6

per cent), but even the post-monsoon (plus 61 per cent in October-December) and winter (13

per cent in January-February).

Met rules out surplus monsoon in 2014 (FE 24.4.14)

India is likely to experience below-average monsoon rainfall in 2014, the government's

weather office said on Thursday, if the El Nino weather pattern affects the four-month-long

rainy season.

The monsoon is vital for India as half of its farmland lacks irrigation. To cut dependence on

rains, India plans to expand its farmland under irrigation by at least a tenth by 2017.

Agriculture accounts for 14 percent of Asia's third-largest economy but employs more than

half of the workforce. Healthy harvests can help keep a lid on food price inflation, which has

been stuck at around 9 percent.

Rainfall is expected to be 95 percent of the long-term average, with a margin for error of plus

or minus 5 percent, during the June-to-September season, the weather office said in a

statement.

The Meteorological Department defines average, or normal, rainfall as between 96 percent

and 104 percent of a 50-year average of 89 cm for the entire season.

The first official monsoon forecast is in line with the latest outlook of the Geneva-based

World Meteorological Organisation's (WMO) forum that predicted mostly below-average

rains in much of South Asia including India.

"El Nino condition continues to be neutral in the pacific but the probability of its occurrence

is on the higher side; about 60 percent," said a weather office official.

The last time India faced a drought with rainfall below the normal range was in 2009 and

prior to that, in 2004 and 2002 - with El Nino hitting the Indian monsoon season on each

occasion.

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DROUGHT IMPACT

A strong El Nino, marked by a warming of the sea surface on the Pacific Ocean, can cause

severe drought in Australia, Southeast Asia and India, while drenching other parts of the

world such as the U.S. Midwest and Brazil with rain.

In 2013, the Indian monsoon posted 106 percent rains, qualifying as an above average year

for rainfall, resulting in record grains production at 262 million tonnes for the 2013/14 crop

from July.

India will update its forecast in June, after the southwest monsoon has typically engulfed half

of the country.

Experts say no pressing panic button, yet (BS 24.4.14)

(PTI) With IMD forecasting below normal monsoon this year because of a possible El Nino

factor, agriculture experts today advised the government not to press the panic button yet.

"We need to be on alert and be prepared but not get panic because the country had escaped El

Nino without any scratch way back in 1997," former chief of Commission for Agricultural

Costs and Prices Ashok Gulati told PTI.

"The monsoon seasonal rainfall is likely to be 95 per cent of the Long Period average with an

error of plus or minus 5 percent," Indian Meteorological Department said in a statement.

Officials in the weather department said the monsoon is expected to be below normal because

of the El-Nino effect.

Gulati, who is now chair-professor at think-tank ICRIER, said below normal rain does not

mean there will be drought. "We have to see how would be the distribution of rain across the

country."

El Nino refers to the warmer-than-average sea surface temperature in the central and eastern

tropical Pacific Ocean. This condition occurs every 4-12 years and had last impacted India's

monsoon in 2009, leading to the worst drought in almost four decades.

Crisil Chief Economist D K Joshi said: "No doubt, the IMD forecast is not encouraging, but I

won't press the panic button now as there is higher probability of normal monsoon."

"Below normal monsoon is not a drought year. What matter is how well rainfall is distributed

across the country. We need to be concerned and be prepared so that we are not taken by

surprise," he added.

The four-month long long monsoon starting June is crucial for kharif crops such as rice,

soyabean, cotton and maize because almost 60 per cent of the farm land in the country is

rainfed.

Gulati said as per the Skymet forecast, rainfall in the country's north west and western

regions would be hit badly if El Nino occurs.

"If it (El Nino) affects rain in the western region, oilseeds, cotton, pulses and onion crops

would be affected. The north-west region may not face much problem as it is irrigated," he

added.

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Harish Galipelli, Head of Commodities and Currencies with JRG Wealth Management said if

the rainfall spread is scattered then it will have impact on agriculture yields and production,

thereby prices.

Australian Bureau of Meteorology and private forecaster Skymet have also predicted a

likelihood of El Nino factor hitting monsoon in India.

Monsoon 2014 to be below normal: IMD (BS 25.4.14)

The Met office also said that there is a 23% chance of a drought

India's southwest monsoon in 2014 is expected to be below-normal at 95 % of the Long

Period Average (LPA), the India Meteorological Department said today in its first official

forecast.

The Met office said that there is 35 % chance of the monsoon being normal in 2014 and 33 %

of it being below normal. There is 23% chance of a drought this year, IMD said

The IMD classifies rains between 96 % to 104 % of the Long Period Average (LPA) as

normal while that between 105 to 110 % of the LPA is considered as ‘above normal’ and

more than 110 % as excess.

Also, rains between 90-95 % of the LPA are considered as below normal, while rains below

90 % of LPA are drought. LPA is the average rainfall received in the last 50 years.

Year Actual Monsoon* First Forecast*

2008 98 99

2009 77 96

2010 102 98

2011 101 95

2012 92 99

2013 106 98

2014 --- 95

*Percentage of Long Period Average (LPA). Presently the LPA of seasonal rainfall over the

country as a whole is 89cm. Rainfall below 90% of the average is considered as a drought.

The last time there was a drought with rains below this range was 2009 and before that, in

2004.

Rainfall above 110 per cent of the average would mean an excessive monsoon. IMD issues

its first forecast in the month of April which is subsequently updated in June.

Weatherman puts chances of a deficit monsoon at 23% (FE 25.4.14)

The Met department’s first forecast says the monsoon rains will likely be 95% of long period

average (LPA), or just below the ‘normal’ range of 96-104% of LPA, reports fe Bureau in

New Delhi. What is worrying is that even the first forecast gives a 23% probability of a

‘deficit’ monsoon, which implies rainfall below 90% of the LPA, calculated on the basis of

the average annual rainfall (89 cm) recorded between 1951 and 2000. The first monsoon

forecast for the year 2014 released on Thursday by India Meteorological Department (IMD)

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gives another 33% probability to ‘below normal’ monsoon and 35% chances for ‘normal’

monsoon.

The met department's next forecast, the more definitive one since it comes after the onset of

monsoon, will be announced in June.

As the graphic shows, in a year when the El Nino weather pattern affects the rainfall, there

has been a big difference between each forecast. Between 2010 and 2013, there was no great

deviation between the first forecast and the actual rainfall received during the monsoon

months (June-September).

But in 2009, the last year affected by drought, the met department's first forecast was 96% of

LPA. The second forecast in June predicted rains at 93% of LPA, while the actual rainfall

was only 77% of LPA. In 2009, when the rainfall was 23% below normal, the foodgrain

production dropped to 218 million tonnes (mt) from 234 mt in the previous year, a decline of

6.8%.

"It's an indicative forecast which would help the state governments prepare themselves for

kharif production in advance," D S Pai, head of the forecast division of IMD, told FE from

Pune.

Monsoon rains usually enters the country through the Kerala coast in the first of June and

cover the entire country during the next four to six weeks.

On the impact of El Nino on the monsoon, IMD said in a statement, “latest forecast from a

majority of the models also indicate warming trend in the sea surface temperature over the

equatorial Pacific reaching to El Nino level during the south-west monsoon season with a

probability of around 60%."

"The emerging El Nino does point towards likely below normal rainfall, though much would

depend on what happens to it in the coming two months,” Ashok Gulati, chair professor–

agriculture, Indian Council for Research on International Economic Relations, told FE.

Recently the private weather analysis agency Skymet had predicted a below-normal

monsoon. It had predicted the monsoon rains during June-September to be 94% of LPA.

Monsoon rains are crucial for agriculture as about 40% of the cultivable area is under

irrigation and around 55% of the foodgrains production, mainly paddy and coarse grains, is

contributed by kharif or summer crop. The monsoon rains during the June-September period

also helps boosting the soil moisture for the rabi or winter crop.

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..

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AGRI /FOOD PRICES

Global food prices rise by 2.3 per cent March: FAO (ET 4.4.14)

Global food prices increased by 2.3 per cent in March from the previous month, the highest

level since May 2013, as some crops were affected due to unfavourable weather conditions,

according to the United Nations food agency FAO.

The Food and Agriculture Organisation (FAO) price index measures monthly price changes

for a basket of cereals, oilseeds, dairy products, meat and sugar.

The index, based on prices of a basket of globally traded food commodities, averaged 212.8

points in March, up by 2.3 per cent from February, and the highest level since May 2013.

"Last month's increase was largely driven by unfavourable weather conditions affecting some

crops and geopolitical tensions in the Black Sea region," FAO said.

Except for dairy products, which fell for the first time in four months, all the other

commodity prices registered gains, with sugar and cereals increasing the most, it said.

The cereal price index averaged at 205.8 points in March, up by 5.2 per cent from February,

marking the second month of significant increases.

"Last month's strength stemmed from a surge in wheat and maize prices reflecting a strong

pace in grain imports, growing concerns over the effect of continued dryness in the south-

central United States on winter wheat crops, and unfavourable weather in parts of

Brazil, the FAO said.

Geopolitical tensions in the Black Sea region, in particular uncertainties with regard to grain

shipments from Ukraine, also provided a boost, it added.

However, global rice prices were generally stable. The vegetable oil price index averaged

204.8 points in March, up by 4.5 per cent from February 2014 and the highest level in 18

months.

The rise in the vegetable oil prices mainly reflected a surge in palm oil, on continued

concerns over the impact of protracted dry weather in Southeast Asia.

Tight inventories in Malaysia and the prospect of rising domestic consumption in Indonesia,

the top palm oil producer and exporter, contributed to the strengthening in palm oil prices, as

did reports about a possible El Nino weather event later this year.

International prices for soya, sunflower and rape seed oil also firmed up.

Dairy prices, however, fell by 2.5 per cent in March from the previous month. "Demand for

all dairy products has been affected by reduced purchases by China and uncertainty over

trade with the Russian Federation," FAO said.

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Additionally, an extended season in New Zealand and a good start to the dairy-year in the

northern-hemisphere have meant that supplies for export have increased.

The dairy commodity subject to the sharpest price drop was whole milk powder, reflecting

reduced buying interest from China, in particular, it added.

Global sugar prices averaged 253.9 points in March, up by 7.9 per cent from February 2014

as prices kept strengthening amid concerns of declining export availabilities from Brazil and

Thailand, due to drought and reduced sugarcane output, respectively.

The likelihood of sugar crops being adversely affected by El Nino later this year also

contributed to the price surge, it added.

Costlier food items push inflation higher at 5.7% in March (FE 15.4.14)

The reading for January WPI inflation was revised to 5.17 per cent from 5.05 percent earlier.

Snapping the declining trend, the inflation rose to a three month high of 5.7 per cent in March

mainly due to spurt in prices of food items like potato, onion and fruits.

The inflation in the food items, based on the wholesale price index (WPI), shot up by 9.9 per

cent in March as against 8.12 per cent in the previous month.

The overall WPI inflation, which was on decline since December, had dropped to a nine-

month low of 4.68 per cent in February.

As per the data released by the government today, the January inflation number has been

revised upward to 5.17 per cent as against earlier estimate of 5.05 per cent.

In March, price rise in potato was 27.83 per cent as against 8.36 per cent in the previous

month. Inflation in onion was 1.92 in the last month of 2013-14 fiscal compared to

contraction in price of the kitchen staple in the previous month.

Overall the inflation in vegetable segment was 8.57 per cent as compared to about 4 per cent

in February. Fruits were costlier by 16.15 per cent in March compared to 9.92 per cent.

The government further said the build up of inflation rate in the 2013-14 financial year was

5.70 compared to a build up rate of 5.65 per cent in the earlier fiscal.

The data further revealed that prices of sugar, pulses, cereals, cement and minerals eased in

March compared to the previous month.

Inflation in the fuel and power category (LPG, petrol and diesel) rose to 11.22 per cent versus

8.75 per cent in February.

Later in the day, government is also scheduled to release data for retail inflation calculated on

Consumer Price Index (CPI).

In the monetary policy review earlier this month, the Reserve Bank had retained the key

interest rate expecting rise in inflationary expectations.

83

(Reuters) - India's wholesale prices-based inflation accelerated to a three-month high of 5.70

percent in March, driven up by increases in food and fuel costs, government data showed on

Tuesday.

The rise in the wholesale price index (WPI) compared with a 5.30 percent jump forecast by

economists in a Reuters poll. In February, wholesale prices, long seen as India's main

inflation measure, rose 4.68 percent, their slowest pace in nine months.

The reading for January WPI inflation was revised to 5.17 percent from 5.05 percent earlier.

Food prices rose 9.90 percent year-on-year last month, faster than an annual rise of 8.12

percent in February.

India's March CPI inflation quickens to 8.31 pct (FE 15.4.14)

Food prices for consumers in March rose 9.10 per cent from a year earlier, faster than

February's provisional 8.57 per cent rise. Reuters

India's annual consumer price inflation in March quickened to 8.31 per cent, driven by higher

food prices, government data showed on Tuesday.

A poll had forecast retail inflation would edge up to 8.19 per cent from a 25-month low of

8.10 per cent in February.

Food prices for consumers in March rose 9.10 per cent from a year earlier, faster than

February's provisional 8.57 per cent rise.

New govt must frame policies to arrest inflation: India Inc (FE 15.4.14)

With inflation on the rise, India Inc has called for the next government to take measures,

including strengthening of the distribution framework...

With inflation on the rise, India Inc has called for the next government to take measures,

including strengthening of the distribution framework and clearing of supply bottlenecks, to

tame price increases.

"We urge the new government to frame policies that allow free movement of agriculture

commodities, promote investment in manufacturing, permit FDI in retail, use MNREGA for

creation of capital assets and improve the retail distribution network," Assocham Secretary

General D S Rawat said.

Retail inflation in March inched up to 8.31 per cent from 8.03 in February, mainly on account

of a rise in fruit and vegetable prices.

A new government is expected to take over after May 16, when counting of votes cast in the

current Lok Sabha election is scheduled. Polling started on April 7 and is taking place in nine

phases, ending on May 12.

"Election-related spending could be a key driver of rise in both wholesale and retail

inflation," Rawat said.

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Wholesale inflation rose to a three-month high of 5.7 per cent last month, mainly due to a

spurt in prices of food items such as potato, onion and fruits.

"Knowing how deep the impact of inflation goes in slowing down the economy, we would

urge that policy actions on this front are swift and decisive," CII Director General Chandrajit

Banerjee said.

Inflation in the food basket, including beverages, increased to 9.1 per cent in March from

8.57 per cent in the previous month, according to Consumer Price Index (CPI) data released

by the Central Statistic Office today.

"We expect a calibrated policy stance in the coming times from RBI in terms of repo rate cut

to revive the economic growth trajectory. Keeping the interest rates high to solve the

structural supply side constraints has increased the economic vulnerabilities and there has

been little respite to inflation," PHD Chamber President Sharad Jaipuria said.

In its April 1 monetary policy review, the Reserve Bank of India had retained the key interest

rate.

"Latest industrial output data shows a decline of 3.7 per cent in manufacturing in February

2014. Along with growth of the industrial economy, we also have on stake sufficient

employment generation," Ficci President Sidharth Birla said.

Retail vegetable prices increased 16.8 per cent in March as against a 14.04 per cent rise in

February. Prices of fruits rose 17.19 per cent compared with a 15.79 per cent increase in

February.

Food & Fuel fire up inflation (FE 16.4.14)

Retail inflation also surged after hitting a 25-month low in February.

Wholesale inflation hit a three-month high in March, bucking a short-duration easing trend

and strengthening the notion that India has yet to tackle the persistent price rise haunting it

for the last five years, reports fe Bureau in New Delhi. Retail inflation also surged after

hitting a 25-month low in February. What principally caused the spurt in both indices is food

and fuel items turning dearer, official data released on Tuesday showed.

While the wholesale price index (WPI) gained 5.7% in March from a nine-month low of

4.68% in February, the consumer price index (CPI) rose to 8.31% last month from 8.03% a

month before.

Although a relatively unfavourable base (5.7% gain in the WPI in March last year) helped

drive up the wholesale price inflation last month, what came as a surprise was a 9.28% WPI

inflation in LPG last month despite a favourable base. Analysts said both the WPI and the

CPI inflation may see a marginal drop in April, aided by the start of the winter crop harvest

and the government’s decision to hold the diesel price hike till elections are over.

Inflation could, however, creep up again from May, making it one of the primary concerns of

the new central government, along with the slump in economic growth.

The rise will worry the central bank as well, which aims to bring down retail inflation to 6%

by January 2016 and it could stick to the tight policy stance, analysts said.

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Core inflation — a key input for monetary policy-making — in the WPI hit a year-high of

3.5% in March from 3.1% a month before.

Non-food manufacturing inflation in the CPI remained unchanged at 7.9% in March from the

previous month.

Coming on the back of a 1.9% contraction in industrial production and lingering concerns

about the El Nino adversely affecting the farm output this year, the rise in inflation will

complicate the central bank's task of balancing price rise with growth, analysts said. Although

the harvesting of winter crops from April may dampen prices of food items, especially of

grains, for some time, the likely impact of the El Nino – which caused the worst drought in

37 years in 2009 – and the new government's response towards tackling inflation will anchor

the central bank's monetary policy, they added.

The rise in inflation in LPG last month from -4.09% a month before drove up the fuel and

power index by 11.22% as against 8.75% in February. Similarly, CPI inflation in fuel and

light went up by 6.29% last month, compared with 6.13% in February.

Wholesale price food inflation rose to 9.9% in March, snapping a three-month losing trend,

while retail food and beverage inflation picked up to 9.10% from 8.57% in the previous

month.

“The RBI is likely to stay concerned on the inflation outlook and stick to the tight policy

stance,” Radhika Rao, an economist at DBS Bank, said. “Policy bias will be for further rate

hikes in the second half of FY14/15 when the potential El Nino development and impact on

southwest monsoon become more apparent.”

The Australian Bureau of Meteorology recently forecast there were greater than 70% chance

that the El Nino would develop during the southern hemisphere winter (Indian summer).

With a nearly 50% weightage of food items in the CPI, any drop in farm production could

ultimately have a bearing on the monetary policy, as the Reserve Bank Of India has renewed

focus on targeted inflation control. The Urjit Patel panel has suggested a target of 8% CPI

inflation by January 2015, 6% by January 2016, and a long-term goal of 4%, plus or minus

2%.

CII director general Chandrajit Banerjee called for supply side initiatives to raise agriculture

productivity, including augmenting investment in agri-infrastructure and improving supply

side management, delisting perishables from APMC, encouraging FDI in retail which would

boost agriculture production, etc. Ficci's Siddharth Birla said: “The central bank must take a

more nuanced stand on its reading of the growth-inflation dynamics as we are fast losing

ground with regard to performance of the industrial sector. Latest IIP numbers show a decline

of 3.7% in manufacturing in February 2014. How long we can stay on this course should be a

matter of national debate.”

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Inflation unlikely to moderate significantly in 2014-15 (BS

17.4.14)

RBI might retain rates at current levels, upside risks to inflation

rise

After declining for three consecutive months, prices spiked again

in March as gains from seasonality abated. The consumer price

index (CPI) rose to 8.31 per cent in March from 8.03 per cent in

February, while the wholesale price index increased to 5.7 per

cent from 4.7 per cent.

Over the past three months, vegetable prices have come down

substantially, pulling down the headline print. However, headline

inflation has picked up again with vegetable prices rising in March. Food inflation in March

rose to nine per cent from 8.03 per cent in February. Primary food inflation also swelled to

9.9 per cent from 8.1 per cent. Economists believe inflation would stay elevated through most

of FY15. Indranil Pan of Kotak Economic Research says: "The next few months are likely to

show a pick-up in headline print as seasonal factors continue to normalise, before dropping

sharply towards the end of CY2014, largely helped by favourable base effect."

Prices would remain elevated as hopes of a bumper food grain production are dim, in the

wake of hailstorms hitting Madhya Pradesh, Uttar Prdesh, Rajasthan, Haryana and Bihar.

The Reserve Bank of India (RBI) has also highlighted there are upside risks to its targeted

eight per cent levels by January 2015. Also, core inflation (both CPI and wholesale price

index or WPI) remains sticky. Core CPI, excluding food and fuel prices,

remained flat month-on-month at 7.82 per cent in March. Core WPI also rose to 3.50 per cent

in March against 3.15 per cent in February. The rise in the prices of metal products,

chemicals and chemical products and alloys has contributed to an increase in core WPI.

Economists expect core inflation to remain sticky at current levels.

However, inflation also faces upside risks from any policy-led upswing in the economy. State

Bank of India's EcoWatch says downward trend in CPI is capped at 7.7 per cent going by

current trends, and might continue to be a heartburn for RBI. If the fears of an El Nino

situation play out, risks to inflation will only increase. Economists believe RBI is unlikely to

cut rates in FY15. Indranil Sengupta of Bank of America Merrill Lynch believes the

monsoons hold the key to RBI's inflation target of eight per cent by January 2015, as a five

per cent swing in food prices impacts CPI inflation by 250 basis points. Like many others,

Sengupta expects RBI to hold on to rates in June 1.

Retail inflation rises on costlier food (FE 18.4.14)

Retail inflation for farm and rural labourers rose to 8.38 per cent and 8.51 per cent in March

mainly on account of high prices of food items.

Retail inflation for farm and rural labourers rose to 8.38 per cent and 8.51 per cent in March

mainly on account of high prices of food items.

The rates of price rise for farm and rural labourers were at 8.14 per cent and 8.27 per cent,

respectively, in February.

87

"Point to point rate of inflation based on the a Consumer Price Index for Agricultural

Labourers (CPI-AL) and Rural Labourers (CPI-RL) increased from 8.14 per cent and 8.27

per cent in February to 8.38 per cent and 8.51 per cent in March," an official press release

said.

Inflation based on food indices of CPI-AL and CPI-RL are 7.55 per cent and 7.53 per cent

respectively during March last year.

The CPI-AL and CPI-RL for March increased by 6 points each to stand at 763 points and 765

points respectively. In case of farm workers, the index recorded an increase between 1 to 17

points in 19 states and a decrease of 4 points in one state.

Haryana with 847 points topped the index table whereas Himachal Pradesh with the index

level of 629 points stood at the bottom.

In case of rural workers, the index recorded an increase between 1 to 15 points in 19 states

and a decrease of 4 points in one state. Haryana with 840 points topped the index table

whereas Himachal Pradesh State with the index level of 663 points stood at the bottom.

The index farm and rural workers in respect of Tripura registered the maximum increase of

17 points and 15 points respectively mainly due to increase in the prices of pulses, mustard

oil, fish fresh/dry, eggs, milk, mixed spices, vegetables & fruits, sugar, supari, dhoti cotton

mill, saree cotton mill and barber charges.