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India agri export stuck on global oversupply

Sector exporters have changed strategy to focus more on processed and directly consumable food items instead of raw, uncooked ones

Dilip Kumar Jha Mumbai
Last Updated : Aug 05 2014 | 11:44 PM IST
Exports of agricultural commodities are currently depressed, due to oversupply dragging down their prices in global markets, below the level in India. Sector exporters have changed strategy to focus more on processed and directly consumable food items, from raw, uncooked ones earlier. In recent months, exports of many of the principal agricultural commodities have stopped, especially those of cotton, wheat, rice and sugar.

This rapid decline in agri exports comes as the government says it is taking all possible steps to increase dollar inflow into India, to contain the current account deficit to a manageable level. “Currently, the situation is very challenging. However, the ministry of commerce is exploring new market access and the ministry of food processing is looking for exports. Hence, overall agri exports are unlikely to get much (adverse) impact,” believes Ajay Sahai, director-general of the Federation of Indian Export Organisations. Led by basmati rice, marine products, cotton and guar gum, overall agri commodities export jumped 16 per cent to Rs 268,469 crore in 2013-14 over the year.

According to the Food and Agricultural Organization of the United Nations, world cereal oversupply is estimated at 36 million tonnes in 2014-15, with production and consumption at 2,498 mt and 2,462 mt, respectively. World cereal inventory is expected to rise by five per cent to 604 mt by June 2015. Prices of agri have fallen substantially in the past two months. Corn (maize) on the benchmark Chicago Board of Trade fell 13.7 per cent to $367 a bushel (a bushel is 25.4 kg) in July from $457.5 a bushel in May. The price in India, however, rose  8.3 per cent to Rs 1,383 a quintal in July, mainly because of deficient monsoon rainfall, which raised fear of a fall in output this year.

Cotton on the InterContinental Exchange fell by 14.5 per cent to $62.87 a pound on July 31, compared to $77.47 a pound on May 31. In India, too, the benchmark Shankar-6 variety fell by eight per cent to Rs 11,107 a qtl from Rs 11,445 a qtl.

Also, output of corn and sugar is estimated to remain a bumper one in America and Brazil, respectively, the major producers. India’s export of cotton will be capped, amid fear of excessive supply from the United States.

“Future prospects of India’s cotton exports, however, would depend upon changes in Chinese policy. Many small and medium-size fabric manufacturing units in China have shut down as the local government promotes import of yarn in place of cotton. Hence, export of cotton will remain capped,” said Sahai.

To promote sugar exports, the government has proposed a 12 per cent subsidy. But, owing to the sustained price fall in global markets, Indian exporters face lack of supply orders.

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First Published: Aug 05 2014 | 10:33 PM IST

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