Friday, 3 May 2019

Basmati exports hit a new high in FY19 on Iranian purchases

Basmati exports hit a new high in FY19 on Iranian purchases

Dairy, pulses exports rise, while shipments of buffalo meat,non-basmati rice fall

Shipments of basmati rice, the largest product in the country’s farm-export basket, touched a record high in volumes and rupee value terms in 2018-19 on account of aggressive buying by Iran and a weak currency.

Volumes grew by about a tenth to over 4.41 million tonnes (mt) over the previous year, while the export value, in rupee terms, grew 22 per cent to touch Rs. 32,806 crore.

In dollar terms, basmati exports went up by 13 per cent to $4.71 billion — the second highest since 2013-14, when it touched a record $4.88 billion.
AK Gupta, Director, Basmati Export Development Foundation, attributed the record shipments to robust purchases by Iran.
“There was some good demand from Iran after a couple of years. Iran purchased over 1.4 million tonnes during the year,” Gupta said.
Further, a weak rupee helped the growth in basmati shipments to touch a new high in value terms.
Basmati accounted for a fourth of India’s overall agri-product 2018-19 exports, which grew 7 per cent in rupee value terms to touch Rs. 1.28 lakh crore from Rs. 1.19 lakh crore in the previous year.
However, in dollar terms, total agri-exports were down 1.15 per cent at $18.38 billion ($18.60 billion).
The dip in dollar revenues was mainly on account of a decline in shipments of buffalo meat, non-basmati rice and groundnut, among others.
Non-basmati rice struggles
Non-basmati rice shipments were hurt by higher pricing.
The increase in the minimum support price for paddy during the year impacted the competitiveness of the grain in the world market.
As a result, exports registered a 17.52-per cent decline in dollar terms and 11 per cent in rupee terms. The non-basmati volumes dropped around 14 per cent to 7.53 mt (8.81 mt).
Sluggish demand from China and the countries in the Far East impacted the shipments of buffalo meat, which dropped to 1.23 mt (1.35 mt).
In dollar terms, buffalo meat shipments stood at $3.58 billion ($4.03 billion).
Dairy, pulses up
Exports of dairy products jumped 76 per cent to 1.80 lakh tonnes (1.02 lakh tonnes) after the Centre announced incentives to ship out the surplus stocks of the skimmed milk powder during the year.
In dollar terms, dairy product exports registered 59 per cent surge in growth at $482 million.
Similarly, pulses exports grew 59 per cent to exceed 2.85 lt during 2018-19.
However, in value terms, shipments were up by only 13.38 per cent on a decline in average prices.
Guar gum shipments, too, posted 4.3-per cent growth during the year, while groundnut exports declined on account of poor offtake from buyers such as Vietnam.
Other products
Shipments of poultry products also grew during the year. In dollar terms, poultry exports were up 14.54 per cent at $98 million ($86 million). In rupee terms, the poultry exports increased by a fourth to Rs. 687 crore ( Rs. 552 cr).
Though shipments of fresh fruits and vegetables were up in volumes, the value declined by about 4 per cent, primarily on account of a dip in per-unit pricing.
Exports of processed vegetables grew during the year, despite a drop in prices. Processed vegetable shipments were up 12.7 per cent at Rs. 2,055 crore against Rs. 1,823 crore in the previous year. In dollar terms, processed vegetables exports were up 4 per cent at $294 million.
However, the shipments registered a decline in value despite higher volumes on lower pricing. Processed fruit and juice exports dropped 1.23 per cent to $639 million ($647 million).
Among other cereals, wheat shipments continued to decline. Wheat exports, in volume terms, were down 43 per cent at 1.83 lakh tonnes (3.22 lakh tonnes), while in dollar value, the shipments fell 46 per cent to $52 million ($97 million).

Monday, 28 January 2019

Domestic crude output down 4.3% in December

Direct bene t transfer, interest waiver on crop loans within a certain limit are likely measures
India’s domestic crude oil production dipped 4.3 per cent while gas production was 4.19 per cent higher in December 2018, compared with December 2017.
The overall output of nished products from oil re neries was 4.96 percent lower during the month under review.An of cial statement said India’s crude oil production during December 2018 stood at 2.86 million tonnes. Of this, production by ONGC was 1.76 million tonnes which is 5.42-per cent lower, compared with production during December 2017.
ONGC’s Output
ONGC’s lower output is attributed to loss of production from western offshore areas in the absence of mobile offshore production units Sagar Samrat and Sagar Laxmi. Sub-sea leakage in some well uid lines of Mumbai High & Neelam Heera Asset, led to ow restriction.
A decline in liquid production and increase in water cut in various fields of Mehsana, Rajahmundry and Assam assets also dragged down oil production. Crude oil production by Oil India during December 2018 was 0.27 million tonnes, which is 4.66-per cent lower compared with December 2017.
A major reason for lower production is less-than-planned contribution from work over wells and drilling wells, an of cial statement said. Crude oil production by private and joint venture projects under the Production Sharing Contract regime was 0.83 million tonnes, which is 1.72 per cent lower than production in December 2017.
Natural gas output
The country’s natural gas production during December 2018 was 2866.51 million standard cubic meters (mscm) in December 2018. Natural gas production by ONGC alone during the month stood at 2197.0 mscm, which is 9.81 per cent higher when compared with December 2017.
But natural gas production by OIL during the month was 232.65 mscm which is 1.82 per cent lower than December 2017. Natural gas production by private and joint venture projects was 436.86 mscm, which is 14.94 per cent lower when compared with December 2017.
Oil India said the major reason for lower production is loss of potential in Deohal area due to presence of CO2 in production stream and due to bandh and miscreant activities. An of cial statement said in RIL’s Sohagpur West CBM Block, there has been reported under performance of Coal Bed Methane (CBM) wells and production was impacted due to the constraint imposed by IFFCO on CBM offtake.
Refinery Output
Re nery production during the month was 21.03 million tonnes, which is 4.96 per cent lower that output during December 2017. The shortfall in re nery production in some Central Public Sector Enterprise re neries was attributed to lower crude receipt and restricted Delayed Coker unit throughput in IOCL’s Gujarat re nery. A delay in arrival of crude vessels at MRPL-Mangalore re nery, among other reasons, was attributed to the lower output.

Sops for agriculture to top Govt’s priority list

Direct bene t transfer, interest waiver on crop loans within a certain limit are likely measures
With farm distress leading to the ruling BJP’s drubbing in three key States last month, expectations are high that sops for agriculture will top the list of priorities when the stand-in Finance Minister Piyush Goyal presents the Interim Budget on February 1.
With rural economy still in doldrums, the Narendra Modi government cannot afford to be seen as a regime that ignores the interests of farmers, who constitute a sizeable chunk of the electorate. “It is not that this government hasn’t done anything for farmers in the last four-and-half years. But the perception of not delivering on the farm front is still sticking out like a sore thumb,” said a source in the Agriculture Ministry, who did not want to be named.
With general elections less than 100 days away, the Budget may be the government’s last chance to salvage the situation. “More than doing, it should be ‘seen’ as doing something,” the source said adding that the Government is working on “something big” for the sector. “They seem to have a political need to announce big-ticket schemes for farmers (like the direct income support scheme adopted in Telangana and other States) but as there is little preparedness, there is a chance of boomerang,” said Avik Saha, national coordinator for Jai Kisan Andolan. “So we expect them to announce something for farmers in the Budget which would subsequently be ampli ed through giant megaphones,” he said.
Direct benefit transfer
Among those schemes that are said to be considered by the Finance Ministry is a direct bene t transfer scheme which promises to give a per acre subsidy directly into the farmers’ accounts. Though its implementation all over the country may cost over ₹1 lakh crore, it may give an impression that the government is doing something for the farmers. It is said that the government will try to curtail its impact on the scal health of the economy by subsuming or reducing subsidy on fertilisers and minimum support prices for grains. Also under consideration is a scheme to waive interest on crop loans within a certain limit to those farmers who are prompt with repayments.
On Wednesday, addressing a meeting in Mumbai, Union Agriculture Minister Radha Mohan Singh made it amply clear that the focus would be on farmers. The Interim Budget will be dedicated to the farmers and it will be yet another step to ful lling the goal of doubling farmers’ income by 2022, he said. Singh has already hinted that there will be double-digit growth in agricultural credit in the Budget, which was around ₹11 lakh crore in the previous Budget.

Sunday, 27 January 2019

Pulse prices are rising, but only a little - AGRI-BIZ & COMMODITY

Buffer stocks resulting from Centre’s incentives have kept prices in check
The prices of pulses may have improved slightly since government agencies began procurement, but normalisation of market prices may have to wait till the end of the year, experts have said. "The government’s efforts of encouraging farmers through higher minimum support prices (MSPs), which were much higher than the prices that the market can sustain, and creating buffer stocks of pulses much beyond the 1 million mt requirement, resulted in a sharp rise in pulses production during the 2016-17 season (23.13 mt ), but pulse prices suffered a huge setback on account of this," said Sanjay Kaul, MD & CEO of National Collateral Management Services Limited (NCML). Prices have still not fully recovered from that setback but government efforts like announcing schemes such as the Merchandise Exports from India Scheme (MEIS) and curbing imports has to some extent absorbed the production surplus, Kaul said.
According to him, the excessive production has resulted in filling up of pipelines and hence lowered prices since then. “But since last year the situation is normalising and as the acreage and production is reducing owing to the lower prices the supply-demand situation is expected to take a normal course by the end of this year,” Kaul told BusinessLine.
The annual commodity year book brought out by NCML, India’s largest private-sector agriculture post-harvest management company, has dealt extensively with the pulses scenario in the country. Per the first advanced estimates brought out by the government last August, production of most pulses (tur, chana, urad and moong) is estimated to be on the lower side as compared to the previous year. The production is estimated to be lower due to adverse weather conditions in States such as Maharashtra, Madhya Pradesh, Karnataka and Andhra Pradesh. But the prices may remain subdued because of the ample stocks maintained by government agency NAFED and also with the recent rains improving the chances of a better crop than anticipated, according to Kaul.
Market rates rising: NAFED
However, NAFED officials maintained that the prices of pulses are rising in the market. "In the last four months, there has been an increase in the market prices of major pulses across most markets in the country. Even though NAFED made a similar intervention in last year too, we didn’t see a similar uptick in mandi prices in the previous year,” said Sanjeev Kumar K Chadha, NAFED MD (see chart). India’s chana (gram) production in 2018-19, for instance, is estimated to be 10.5 mt, nearly 6.5 per cent lower than the 2017-18 production. Similarly, at 4.08 mt, tur production this year too is expected to be 9.33 per cent lower than that in the previous year. According to NCML, Indian traders had consumed the full tur import quota of 2 lakh tonnes in 2017-18 as in Myanmar tur was cheaper and parity was in favour of importers despite the 10 per cent import duty. Moreover, corporate buyers who are hoping that the government will open up imports in the lean season, have already booked 3-4 lakh tonnes of tur in Myanmar. “The buyers are planning to store their inventory in Myanmar till the Indian government lifts restrictions on imports,” it said. Urad production in 2018-19 is projected to be lower than the previous year’s 3.56 mt. According to the firm, despite the government increasing the MSP of urad to Rs. 5,600 from Rs. 5,400 a quintal, farmers shifted away from urad due to lower domestic prices throughout the year, it said.
Time for more schemes
According to Kaul, it’s time that the government announced additional schemes with export incentives not only on chana but on the exports of processed products made of chana, such as dal and besan. Besides, the government should leverage its bilateral and free trade agreements with South Asian and South-East Asian countries. For instance, Bangladesh imports about 12-15 lakh tonnes of pulses, while Sri Lanka imports roughly 3 lakh tonnes.

Sunday, 20 January 2019

The dynamics of India’s rice export boom

India has been the world’s top rice exporter since the beginning of this decade. But this boom has benefited only merchant capitalists, not consumers and producers
India emerged the world’s largest rice exporter in 2011-12, displacing Thailand from its leadership position. Two factors played a role in this. The first was the government’s decision in February 2011 to lift a four-year ban on exports of non-basmati varieties of rice, paving the way for a rise in exports of those varieties.
The second was a decision of the then Thai government under Prime Minister Yingluck Shinawatra, taken in the same year, to favour farmers by strengthening a Rice Pledging Scheme under which it promised to procure unlimited stocks at an enhanced price that reflected a 50 per cent increase over 2010. The consequent increase in domestic prices obviously reduced the incentive to sell in export markets rather than to the government or in the local market. India was a major beneficiary, recording a sharp increase in exports of non-basmati varieties. As opposed to exports of around 1,00,000 tonnes of The dynamics of India’s rice export boom - - The Hindu BusinessLine those varieties in 2010-11, exports soared to 4 million tonnes in 2011-12. Exports of basmati rice in those two years stood at 2.3 and 3.2 million tonnes respectively (Chart 1).
Non-basmati surge
Given the circumstances, the Indian rise to dominance in global rice markets is explained without much difficulty. What is striking, however, is the continuous increase in exports of non-basmati varieties since then, to 8.2 million tonnes in 2014-15, and after a fall to 6.4 million tonnes in the subsequent year, a rise again to 8.6 million tonnes in 2017-18. The result has been that despite the significant price difference between basmati and non-basmati rice varieties, the difference in foreign exchange earned from exports of these varieties has narrowed considerably (Chart 2).
The increase in non-basmati exports occurred despite the fact that the enhanced pledging scheme in Thailand was suspended in early 2014, that production in India did not rise much till 2016-17, having fluctuated between 104 and 107 million tonnes between 2011-12 and 2015-16, before rising to 110 and 113 million tonnes in the next two years, and that Vietnam has been a third important player in world markets. India’s share in world exports in recent years (2014-18) has stayed at 25-26 per cent, Thailand’s has fluctuated between 22 and 25 per cent, and Vietnam’s between 13 and 16 per cent. As a result, the exports to production ratio for rice in India rose from 2.4 per cent in 2009-10 to 6.8 per cent in 2011-12 and 9.6 per cent in 2012-13, after which it has fluctuated between 9.9 and 11.3 per cent. In normal circumstances, this should have resulted in a degree of price buoyancy in domestic markets, and discouraged exports. But the incentive to export seems to have remained high and persistent.
What this suggests is that over a relatively long period domestic demand for rice has remained below domestic availability, even after taking rising export ratios into account. This is surprising, because procurement introduces an ‘exogenous’ player in the form of the government into the market. Government procurement fluctuated between 32 and 35 million tonnes between 2011-12 and 2015-16, before rising to 38 million tonnes in the following two years when production was also rising.
The minimum support price (MSP) (adjusted for the paddy to rice conversion) at which rice was procured by the government, presumably setting a floor to market prices, rose over time but remained consistently below the export price for Grade A rice from India until mid-2015 (Chart 3). The recent sharper rise in MSP has more or less brought it to par. So rather than the procurement price, it may be the quantum of procurement that has been kept at levels that have not affected the incentive to export rice.
This limited effect of procurement on the incentive to export is reflected in the relationship between the export price and wholesale prices in three metro cities, for example. As Chart 4 shows, wholesale prices have more or less matched the export price in Delhi and Mumbai, though the wholesale price in Chennai is afflicted by unusual volatility that needs a separate explanation. Going by this trend, it appears that after non-basmati exports were liberalised, the international price has set the range of domestic prices, resulting in an implicit calibration of domestic prices with border prices.
Subdued domestic demand
Once again this suggests that domestic demand for rice has remained below domestic availability, despite the rising share of exports to domestic production. This subdued demand hits farmers, who find cultivation increasingly unviable despite rising rice exports.
Moreover, the benefit of a “disciplining” international price does not seem to have accrued to consumers. Retail prices in all metropolitan cities have remained well above the export price (Chart 5), showing high and rising distribution margins. So the liberalisation of the rice trade seems to have benefited only one section, the merchant capitalists, and not the actual producers or consumers.
The oil import bill is just one of the factors responsible for the rising trade de cit. Non-oil imports cannot be overlooked
India’s external account has once again emerged as a source of concern, as the current account deficit widened to reach 2.4 per cent of GDP over April-June 2018. This increase was driven entirely by the trade deficit, which grew rapidly in 2017-18. Since 2014, as Chart 1 shows, exports have been mostly stagnant (after a period of healthy increases before then) but total imports came down and then increased sharply in 2017-18. This was reflected in the total merchandise trade deficit, which declined for several years from the large deficit observed in 2013-14, and only rose sharply once again in 2017-18.
More recently, over the period April-November 2018, the trade deficit is once again said to have widened to ₹892 billion, an increase of 30 per cent over the same period in the previous year.
This timing suggests that global oil prices have been the significant driver of the total trade deficit. After all, India is a substantial net importer of oil. Periods of rising global oil prices have therefore been associated with higher total imports and when global oil prices fall or stay low, the import bill comes down correspondingly. So it seems only natural to assume that the external deficit is really driven by factors outside domestic policy control, particularly the vagaries of the global oil market. Indeed, there is no doubt that the Modi regime benefited hugely from the global decline in oil prices that was so marked in the first four years of its tenure, which reduced the pressure on the balance of trade, contributed to lower rates of domestic inflation, and provided windfall gains to the public coffers as the government did not pass on most of the oil price decline to consumers but instead raised tax rates.
However, matters with respect to the impact of oil prices on the balance of trade are not quite so simple. To start with, India is both an exporter and an importer of petroleum products, and the growing involvement of domestic oil refinery and distribution corporations (particularly the private ones) has made external trade in oil and oil products quite complicated.
Quite often, increased oil exports reflect the choices domestic oil companies make to produce for the domestic market or to export, which in turn are related to the local prices and duties, therefore driven by domestic policy. Chart 2, which shows only the oil trade balance, indicates that the oil deficit can increase even in periods of relatively low global oil prices (as in 2016-17) precisely because of such choices made by Indian oil corporations, especially the private players like Reliance.
What complicates matters further is the fact that non-oil imports have typically been high and rising rapidly. Chart 3 shows that even in the mid-2000s, non-oil trade was largely in balance and then began to show only relatively small deficits from 2006 onwards. After 2008 such deficits grew rapidly, as imports kept growing much faster than exports.
Rapid expansion
The non-oil merchandise trade de cit peaked in 2012-13, ironically a time when global oil prices were also not that low. They came down the following year, but then rose once more, as non-oil imports kept expanding rapidly. It is worth noting that this increase was driven by increasing import volumes, as prices for many of India’s imports also remained low. This is an important point, because it points to the fact that the potential of imports to displace domestic production has been much greater than is indicated only by the value of imports.
Indeed, increased imports of a variety of final goods, both primary and manufactured, have added to the woes of many small-scale producers in agriculture and industry as they have kept domestic prices of their output low, sometimes even below costs. This has also meant that even in the period of rise in oil prices in 2017-18, the non-oil trade deficit was even larger than the oil trade deficit. Chart 4 points to an interesting tendency: since 2004, the share of the oil deficit in the total balance of trade deficit has been coming down continuously, barring the outlier year of 2013-14 when world oil prices spiked sharply. This has also meant that even in the period of rise in oil prices in 2017-18, the non-oil trade deficit was even larger than the oil trade deficit. Chart 4 points to an interesting tendency: since 2004, the share of the oil deficit in the total balance of trade deficit has been coming down continuously, barring the outlier year of 2013-14 when world oil prices spiked sharply.
Indeed, from being 20 per cent more than the actual trade deficit (because the non-oil balance was in surplus then) it has fallen to explaining less than half — only 44 per cent of the deficit in 2017-18. So high global oil prices are only one of the many reasons why India should be concerned about the rising external trade deficit. The more significant culprits lie elsewhere, and they cannot be simplistically blamed on global forces beyond the government’s control.

Monday, 26 November 2018

Centre announces 5 per cent subsidy to boost rice exports

Non-basmati shipments to get subsidy from Nov 26 to March 25
As a 13 per cent increase in minimum support price (MSP) for paddy slows down India’s rice exports in the current financial year, the Centre has announced incentive to boost the shipments of the cereal. The non-basmati rice exports will get a 5 per cent subsidy under the Merchandise Exports from India Scheme (MEIS) from November 26 till March 25, 2019, a Commerce Ministry note said. The Centre’s latest move to subsidise the non-basmati rice shipments for the first time since exports were opened up in 2011 assumes significance as the country is headed for a record harvest of rice, pegged at 99.24 million tonnes by the Agriculture Ministry in its first advance estimates.Also, the rice stocks in the Central pool as on November 1 stood at 16.25 mt, over 60 per cent higher than the buffer norms.
The harvest of paddy has already commenced in several States and the state agencies led by Food Corporation of India have already started the procurement of the cereal. “The 5 per cent incentive under MEIS will definitely enhance our competitiveness in the world market,” said BV Krishna Rao, President of the Rice Exporters Association, a trade body of non-basmati rice millers and exporters. The subsidy coupled with a weak currency would help us offset the impact of the MSP on exports and cover the shortfall in shipments, Rao said. The Centre had increased the MSP for paddy by ₹200 per quintal at ₹1,750 per quintal for common variety and ₹1,770 for Grade A.
Slowing exports
Indian’s non-basmati rice exports have slowed down during the past couple of months and exporters said the hike in MSP had hit their competitiveness in the world market thereby impacting the exports. In the first half of the current financial year, the shipments were down at 3.72 mt (4.28 mt in corresponding last year) valued at $1.59 billion ($1.74 billion). The opening up of non-basmati exports in 2011 has helped India emerge the largest rice exporter for past several years. Major markets for the non-basmati rice are the African and Asian countries. India, which ships out over 12 mt of rice, now accounts for over a fourth of the annual global rice trade estimated at around 47 mt by the Food and Agricultural Organisation. India competes with Vietnam, Thailand and Pakistan in the world rice market.
India’s total rice production during 2017-18 stood at 112.91 mt and the government is targeting 113 mt this year. The FAO in its recent biannual Food Outlook has forecast that global rice production is set to increase by 1.3 per cent to a new high of 513 mt this year and India would be spearheading the growth in production.

Monday, 3 September 2018


Riding on a near normal monsoon, output of most food crops is projected to hit record levels in 2017-18 to give an all-time high foodgrain harvest of 284.83 million tonnes, 3.5 per cent higher than that of the previous year, according to the 4th advance estimates released on Tuesday.
Rice production is expected to touch a peak of 112.91 mt, 3 per cent more than last year’s, while wheat will just fall shy of the 100-mt mark, the data released by the Agriculture Ministry showed.
Pulses production, on the other hand, is seen crossing 25 mt, despite a substantial fall expected in tur production. The record increase expected in urad and gram will compensate for the tur shortfall.
Despite an anticipated 17 per cent drop in soybean output to 10.98 mt, total oilseeds production is projected to be similar to that of the previous year, at 31.31 mt, thanks to an impressive recovery expected in groundnut output at 9.18 mt, nearly 23 per cent higher than the 7.46 mt in 2016-17.

The production of coarse cereals too is expected to climb to a new high of 46.99 mt, up 3.22 mt from 2016-17, despite bajra yields being projected to slide 5 per cent.
A record 20 per cent increase in sugarcane production in 2017-18 to 376.9 mt has already precipitated a severe crisis in the sugar sector, requiring the government to intervene so that the sugarcane farmers, whose dues from sugar mills have mounted, get some reprieve. Cotton output, too, is projected to go up by more than 2 million bales (of 170 kg each) to 34.89 million bales, according to the official data.
The estimated maize output will be 28.72 mt, which is nearly 3 mt more than the final production in 2016-17.