Cereal exports to be under pressure

Initial surge might not sustain due to global oversupply and falling prices, says trade

While the initial export of cereals such as wheat, maize and rice was encouraging, their shipments are likely to moderate over the rest of the year, due to surplus global supply and estimates of lower realisation.

Private exporters and government agencies shipped 3.29 million tonnes of wheat in the first five months of the current financial year as compared to 1.52 mt in the corresponding period last year. Basmati and non-basmati rice exports saw a  jump to 1.75 mt and 2.76 mt from 1.5 mt and 2.54 mt, respectively. Shipment of other cereals moved to 2.41 mt from 1.99 mt in the period between April and August, show data compiled by the Agricultural and Processed Food Products Export Development Authority (Apeda).

However, the trend is not expected to continue. “It might reverse now, due to falling global prices on global over-supply,” said M P Jindal, president, All India Rice Exporters Association (AIREA).

Prices of all agri commodities, including cereals, have fallen up to 42 per cent in the past year on a rise in supply. The near-month contract on the benchmark Chicago Board of Trade for wheat and corn (maize) fell 33.5 per cent and 40.7 per cent to $6 a bushel and $4.41 a bushel, respectively,  over a year. Rice remained resilient, with a marginal 2.2 per cent decline to $15.13 for every 100 pounds.

The decline has moderated prospects for India’s exports of cereal. Jindal estimates these to decline 15-20 per cent this year.

Also, the  Food and Agricultural Organisation of the United Nations recently estimated global cereal output to rise 7.7 per cent to 2,489 mt in the marketing season (July–June) this year, as compared to 2,312 mt in the previous year. But world utilisation of cereals is set to keep a lower pace of growth, of just 3.3 per cent, to 2,415 mt (earlier, 2,339 mt). Consequently, the world stock is set to swell 12.4 per cent to 558.9 mt in 2013-14 as compared to 497 mt last year.

“Wheat and maize might see a decline in exports this year but that will be covered by an increase in export of basmati rice. In value terms, therefore, overall export of cereals would remain the same as last year,” said A K Gupta, advisor, Apeda..

 

Assuming the value of cereal exports remains the same as last year, the quantity of shipment will surely decline to the tune of depreciation in the rupee against the dollar. The rupee fell 16.53% to close at 61.55 against the dollar on Monday.

 

Basmati rice exports in India are set to rise to 4 million tonnes this year from the level of 3.5 million tonnes in the previous year.

 

According to Vijay Setia, ex-President of AIREA, India is enjoying a premium at least in rice over its competing countries including Pakistan, Thailand and Vietnam. Pakistan produces around 6.5 million tonnes of rice and exports around half of it. Out of 110 million tonnes of rice production, India exports around 10 million tonnes annually.

 

India’s rice exports would continued to find a niche market globally being the world’s healthiest rice with a number of health benefits. Exports of other cereals, however, would continue to remain under pressure, said Setia.