Business Standard

Soaring global cereal prices present export opportunity for India

Related News

Soaring have provided a rare opportunity, which India should leverage by allowing exports of beyond the mandatory buffer stocks, said economists.

According to a recent report by Rabobank, average wheat prices surged nearly 15 per cent from US cents 651 per bushel in the third quarter of 2010 to US cents 748 per bushel in the second quarter of the current calendar year. Similarly, corn price shot up to US cents 732 per bushel from US cents 421 per bushel in the period under consideration. Sugar firmed up to US cents 24.4 per pound from US cents 20.1 per pound.

“The strong price support in agri commodities markets is expected to continue due to supportive fundamentals and on-going investor interest. The agri markets have greatly outperformed the equity and energy markets in August, as recession concerns and the possibility of increasing inflation, along with tight balance sheets encouraged both speculative and commercial buying in agri complex,” said the Rabobank report.

Investors are also likely to continue looking at the agri complex as a hedge against inflation — currently undervalued relative to gold, the traditional inflation hedge.

As on July 1, foodgrain stocks, including rice and wheat, stored in India’s central pool stood at 64 million tonnes, against the mandatory buffer of 27.14 million tonnes. On August 1, foodgrain stocks in the godowns registered with the public sector grain management company, the Food Corporation of India, marginally fell to 61.28 million tonnes. According to trade sources, a significant quantity of the stock could be damaged because it is stored in open plinth and exposed to moisture.

“Instead of allowing foodgrain to spoil, the government must allow an additional quantity for exports, considering the record high global price as a temporary phenomenon,” said D K Joshi, chief economist of rating agency Crisil.

The government, however, allowed a marginal quantity of exports of rice and sugar, which could not make any significant impact either on domestic prices or the storage conditions.

The Food and Agriculture Organisation (FAO) of the United Nations had recently said that prices of bread and wheat flour remained at relatively high levels in the Russian Federation, supported by increased fuel prices and export demand following the removal of the cereal export ban from July 1. Prices of bread and flour in July were 22 and 15 per cent above their levels a year earlier, respectively.
 

BRIGHT CHANCES
Commodity prices as on August 23
Commodity Particulars Units 2010 2011 Chg (%)
Rice CBOT $/tonne 235 371 57.57
Thailand $/tonne 420 530 23.47
Wheat CBOT $/tonne 208 277 31.17
NCDEX Rs /qtl

-

1,151

-

Chana Delhi Rs /qtl 2,158 3,183 47.49
Soybean Indore Rs /qtl 2021 2,411 19.29

Similarly, white maize prices further strengthened in July in Central America, hitting new records. High international prices of yellow maize continued to provide support.

Madan Sabanavis, chief economist of Care Ratings, said: “Certainly, it is an opportunity for India to grab. But, the government would not like to open free exports of commodities like rice, wheat and sugar which created a havoc in recent years. The government would not like the scenario to repeat in the future.”

In 2005-06, a wheat supply shortage had prompted the Indian government to import the grain at a very high price from surplus countries such as Kenya. The same step was repeated in 2008-09 for sugar, when the government was forced to allow import of raw and white sugar duty-free, to meet rising domestic demand.

Read more on:   
|

Read More

Cotton yarn exports to touch record high in FY13

This financial year, cotton yarn exports are expected to touch an all-time high, owing to good demand from China. Textile Commissioner A B Joshi said ...

Quick Links

 

Market News

We won't stop looking at acquisitions: Siraj Chaudhry

Interview with Chairman, Cargill India

Govt to aid coffee growers in fight against pest attacks

The severity of WSB attacks has been such that many estates have resorted to uprooting arabica plants to avoid further damage

HKEx aims to expand mini contracts to more metals and coal

Hong Kong Exchanges and Clearing Ltd (HKEx) plans to expand the range of its three "mini" contracts to include more base metals as well as coal, ...

Adverse market conditions forcing closure of oilseed crushers

Refiners prefer to import crude palm oil from Malaysia and Indonesia, finding this cheaper than local crushing

Muhurat trading: Sensex gains 64 points; Nifty ends at 8015

Markets gained for the fifth straight session to end the customary 'Muhurat' trading session held to usher in Samvat 2071 on a firm note

Back to Top