INDIAN AGRO IMPORTS RISING TREND; EXPORTS DOWN --FINANCIAL EXPRESS
5TH JULY 2017
AN ANALYSIS OF TRADE OF AGRO ITEMS
IMPORTS SOAR & EXPORTS DIP
There is a rise of 30% in value of imports of three essential agro items, namely wheat, pulses, vegetable/edible oils, -- indicative of substantive demand pull in the country (See charts below).
Data analysis of India’s seven select but vital agro related items of exports reveals that there is a sharp slump—40% in their overall value-- during last four years. Commodities are wheat, rice, sugar, cotton, soymeal, guar gum and beef+fish .
Exports falter when goods are not competitive, lack of local production and/ or poor demand overseas. Edible items are of daily use. Thus with rising population, probability of lower demand abroad is not logical. Two successive draughts in 2014-15-16 may justify drop in production but lack of adoption of new technologies and efficient farm practices is the root cause.
Pulse’s import jumped from $2.3 billion in 2013-14 to $4 billion--an increase of 74%. Out of 5.4 million tons (mts) of pulses shipped to India 50% or about 2.7 mts are peas/yellow peas from Canada/USA. Kharif acreage of pulses is down by 33% which give ideas of lower output, compelling higher imports of Tur, Urad Moong. News of possible decline in production will make imports costlier.
Government has been fronting state agencies for import through bulk tendering. PSUs tenders escalate world prices, thereby pushing up values for private import as well. When state agencies dispose pulses in domestic market at subsidized prices—that is at a loss-- this again disturbs the parity of private imports because they cannot discount their costs. This may discourage trade to import thereby creating more scarcity in the country.
From exporter of wheat of about 14 million tons (Approx. $4billion in 2012-13 to 2014-15), India has turned structural importer of $ 1.5 billion of grain in last three years. Spike in wheat import in 2016-17 over previous year is 840% by value.
In 2014-15 and 2015-16 market estimates of production each year varied 84-87 million tons (mts) (though Government claimed 93-95 mts). FCI stocks depleted to 8 mts (buffer norm 7.5mts) on 1st April2017 and imports ballooned to about 4 mts in 2016-17 thus validating market’s view.
Wheat procurement pf 30mts this year vs targets of 33 mts implies that OMSS supply to flour millers will be restricted. This necessitates private imports of 5-6 mts in 2017-18.Already importers are looking for cargos from September 2017 onwards from Australia and Black sea at landed values of $240 and $205 respectively which will be cheaper than domestic wheat after 10% duty paid.
Government has rightly stayed away from importing wheat directly for FCI and let privates fill the gap. This prudence has kept world wheat prices range bound and non-inflationary, because trade imports in economical lots with spread of time, instead of bulk tendering by Public sector Undertakings (PSUs) which results in inflated import values.
Import of palm/soy/sunflower oils has remained steady-- value wise between $8-9 billion per annum. There are strong pressures from oil seed crushing industry to raise import tariff to create a disparity by having high landed cost of overseas product so that locally produced oil could be cheaper. Government has done well in levying moderate duties on oil to protect consumers –60% of which are based in rural areas including farmers and not to promote inefficient production and processing.
Unless high yielding oilseed varieties are available in the country –the value and volume of vegetable oils import is bound to ascend.
In 2014-15 basmati/ non-basmati rice exports were $7.8 billion that has slipped to $5.8 billion in 2016-17—though India remains world’s largest exporter of rice of 10mts. Poor demand in Africa, especially in Nigeria of non-basmati rice, and slow down of basmati shipments to Iran and Saudi Arabia could be possible reasons. Iran shipments declined from 1.44 million tons in 2013-14 to 0.7 million tons in 2016-17—down by 50%.
Outlook of Non-Basmati rice for 2017-18 appears positive as strong demand for Nigeria via neighboring Benin is supportive; Bangladesh requires more than one million tons of rice desperately and trade is focused on this demand. Indian non-Basmati rice prices are lower than competition from Thailand, Vietnam, Pakistan.
The success of Rice export business is attributed to minimal interference by Government, diversity of paddy varieties, superior capability for par-boiled rice, logistical advantage for Africa, botched up past policies of Thai government in paddy pricing and poor performance of Pakistan. Indian rice export is negligible to South East Asia and China.
Cotton exports tapered down from $3.8 billion to $1.4 billion during 2013-14 and 2016-17---lower by 63%. Exports to China and Pakistan suffered, while Bangladesh remained a consistent market. India’s share of exports to China has dropped from almost 80 percent in 2011 to 10 percent in 2015. Indian trade is diversifying to newer markets of Indonesia, Taiwan, Turkey and Thailand to gain the momentum.
Soymeal /Guar gum /Beef and Fish
Drastic fall (86%) in Soymeal exports from $2.8 billion to $0.38 billion ; likewise 75% lower guargum exports and 48%decline in Beef and Fish in 2016-17 from their peak performance of $10 billion in 2014-15. Beef exports are not likely to pick up because of current confusion. GST complexities is another factor that is bound to affect the trade.
We are becoming a high cost economy in agro related items. If we continue to dither in our export earnings by lack of quality/procedures/ poor yields/price parities, resultant suffering will be transmitted via trade to the farmers and another undesirable cycle of joblessness and loan waivers will commence.