India's groundnut exports fall 8% in 11 months

Huge carryover stocks in global markets led by bumper crop in Argentina, US cited as key reasons for decline

India’s groundnut exports declined eight per cent in the period between April 2013 and February 2014 due to huge carryover stocks in global markets led by a bumper crop in Argentina and the United States.

Indian Oilseeds and Produce Export Promotion Council (IOPEC) data showed India’s groundnut exports at 456,955 tonnes in the first 11 months of the financial year 2013-14 as compared to 496,059 tonnes in the corresponding period last year.

In value terms, however, the decline was steep at 22 per cent due to fall in global prices of groundnut. IOPEC data showed total exports in value terms at Rs 2,913.8 crore in the first 11 months of the financial year 2013-14 as compared to Rs 3,776 crore during April 2012-February 2013 period.

“The fall can be attributed to the global demand and supply factors. Groundnut prices in world markets crashed and have become almost half during the last two years from around $2,480 a tonne to around $1,300 a tonne due to bumper crops, huge carryover stock in Argentina, China and the US,” said Kishore Tanna, chairman of IOPEPC.

The US has a huge carryover stock of about 1.04 million tonnes, whereas Argentina holds about 0.43 million tonnes of stock for 2013-14. These  countries are offering competitive price in world markets as compared to India. “The import demand from China has also reduced due to huge production of groundnuts in China (about 17 million tonnes in 2013-14). Since China is one of the key markets for Indian groundnuts, lower imports from China have exerted pressures on Indian exports,” said an analyst.

Another key factor is huge depreciation in the currency of Argentina, which is one of India’s biggest competitors. The Argentine peso has depreciated 36 per cent from 5.12 during April 2013 to 7.99 against the US dollar in April 2014. By comparison, Indian rupee has depreciated  just 10 per cent from 54.12 to 60.28 in the corresponding period. The huge depreciation in the currency of Argentina has enabled the exporter to offer much competitive prices.

Expressing concerns over huge subsidy by competing countries, Tanna said the US currently pays around $ 20 billion per year to farmers in direct subsidies as “farm income stabilisation via US farm bills. Large subsidies given by developed countries to their farmers have blunted the competitive edge of Indian agricultural products.

On the domestic front, factors such as unsteady production accompanied with lower yield, lower quality of Indian groundnut, high freight rate and various taxes imposed on exports have caused downward pressures on exports.