Monday, June 22, 2015




Tejinder Narang
If the probability of deficient monsoons does not cast a negative spell on Indian summer crops (or assuming that Skymet’s forecast is proved right) and rice production stays around 103 million tons (mts), India can again maintain top rank in world rice trade by shipping out about 12 mts in 2015-16. An adverse export performance by India can rattle worldwide rice trade with extreme volatility and exorbitant prices. 
 India has been top exporter in rice’s global trade of about 42 mts by averaging around 10.5-11 mts ( 25% of world trade) annually during last four years (since 2011). The sustainability in rice exports— the only commodity with competitive edge internationally as compared to other Indian agro commodities—is the resultant outcome of combination of external factors, dynamics of domestic market, hybridization of paddy and efficient execution of contracted business both form East and West coast ports of India. Thailand has been trailing India by a small margin in last two years, while India is also exposed to competition from—Vietnam, Pakistan, Myanmar, and Cambodia. 
India primarily caters to Middle East/ Africa for non-Basmati and EU/ USA for Basmati variety. Dubai has emerged as a key trading hub for financing and facilitating payments especially for Africa.  Indian exports are undertaken by medium sized private companies from open market, without any export subsidy or Government’s intervention. No MNCs or PSUs or mega corporates are engaged in this business. After prohibition on exports was revoked in 2011, FCI’s stockholdings remain untouched. There is no MEP (minimum export price) or registration requirements that enable ease of doing business.

China’s current rice imports are about 4 mts in 2014-15, up from 0.5 mts in 2010-11, and it has kept Indian Non-Basmati rice at an arm’s length. Chinese supply-demand gap is filled by official and unofficial imports from Thailand, Vietnam, Pakistan and Myanmar, though recently grey market access through land route is attempted to be blocked. China’s escalating import demand due to water conservation measures and higher cost of paddy will continue to increase in the near future and that will keep South-Eastern origins (Vietnam and Thailand) well supported for consumption of their production, which is a net advantage to India for pricing and limiting trade rivalry. At political level Indian Government’s efforts are on for induction of non-basmati rice into Chinese procurement system.
 Thai Government messed up their entire rice matrix through their modified “paddy pledging scheme” of 2011 by giving farmers values 50% above market price for political populism that resulted in accumulation of 18 mts of rice equivalent to 43% of world rice trade; pushed price levels unrealistically way above international quotes including those from India. Though this scheme was wound up in 2014, it depressed Thais booming exports from 10 mts in 2010-11 to 7 mts in 2011-12 while causing severe collateral  long term damage to rice quality, despite prices having crashed to tradable levels by $200 mt (from $580 in 2011 to $380 fob now). Some lessons can be learnt by India that abnormal increase in MSP with dedicated procurement can be counterproductive. Out of 18 mts of pledged inventory-- 10 mts is to be reprocessed, 6mts gone irreparably bad/unfit for human consumption and only 2 mts could be sold (USITC report of April 2015). Thus international buyers suspect Thai quality. It has simultaneously generated goodwill for Indian rice with enhanced access/success abroad. 

Other  external developments were-- USA/UN sanctions against Iran in 2010-11, opening of an Indo-Iran rupee account, commercial exploitation by Iran of high yielding Pusa 1121 Basmati rice developed by IARI, which is 33% cheaper (about $1000-1200fob) than conventional Basmati rice($1600-1800 fob). Pusa 1121 has exceptionally long grain length of about 8mm with elongation characteristic of 25mm upon cooking. About 1.4 mts were shipped out in 2013-14 vs 0.6 mts in 2011-12 to Iran which proved highly remunerative both for the trade and farmers. Though Iran notified a general ban on Indian imports in 2014-15 due to excessive imports, it turned out to be “restrictive” trade between “select” importers and exporters with overall exports touching around 0.95 mts. Other Middle Eastern nations—Saudi Arabia, Kuwait, Yemen, UAE are also keen to procure more of Pusa 1121 rice. Total exports to Middle East are about 4 mill tons.
West African market (Nigeria, Senegal, and Ivory Coast) and South Africa of about 3-3.5 mts per annum are hooked onto 5% parboiled variety and 100% brokens parboiled rice. No other origin, except Thailand, can “efficiently” service parboiled requirement. Thai Inconsistent quality, higher prices and freight for Africa are favourable for growth of Indian Parboiled rice Industry.
India’s MSP of non-basmati paddy is about $224/mt. All other origins except Pakistan are costlier than India. Furthermore, levy procurement by state governments stands abolished in 2014-15 which has enhanced market availability. FCI is trying to auction 25% broken rice (raw/parboiled) at OMSS of Rs 23/kg while in open market 5% brokens parboiled can be bargained at Rs 20-21/kg. There are virtually no takers for FCI stocks. This evidences market comfort in the supply side.  There are multiple varieties on offer like IR36, IR64, 1001,Swarna, Sona Masuri, Ponni samba Parmal, P4 etc and that gives options for transacting the deal at right prices. Indian grain is available throughout  year even from West Bengal, Bihar, Chhattisgarh, Odisha, and Jharkhand in addition to other growing regions. Rice is not traded in any future exchange and thus there is nil scope for open speculation or price rigging. 

India’s presence in global rice trade is a great stabilizing force.   Exports support better price realization for paddy farmers; Basmati is a product of specific GI (geographical identification) and is highly remunerative. India’s absence/decline from Non- Basmati rice in international trade will spike prices more than $1000/mt fob (currently $350-400/mt) especially when Chinese appetite for rice is expanding. Thai Jasmine (aromatic) rice may touch $3000/mt fob (now at $850-$900) if our Basmati exports drops significantly. Hopefully that state of affairs will not arise despite poor monsoon due to more than sufficient carry- in inventory available with Government and in Indian markets.



Tuesday, June 9, 2015

Monday, June 8, 2015


Guru Nanak Sahib’s critical contribution in the mystical domain is the process of transmission of spiritual power (Nam, Hukam or Divine Shabd or the Word or the JOT) to another human being, Guru Angad Dev Ji, his successor and to make him akin to his predecessor -- with mandate to initiate other souls with the same technique (Jukti). The string of succession is "historically" understood up to the tenth Nanak—Guru Gobind Singh Ji. Thus each Guru, despite living in different physical formats, carried the spiritual light or the same “Jot of Roohaniyat” for the benefit of other human beings of that time.

The word “Waheguru” that describes the glory and greatness of the Guru was first uttered by Guru Angad Dev Ji, the second Nanak. This is in accordance with the legends that are associated with spiritual ascensions of the Perfect masters. There could always be a sense of disbelief to the mystic narratives but there is no smoke without a fire.

In the cosmic hierarchy of the spiritual Masters- Pind, Anda, Brahmanda (the region with least degree of mind and matter) - soul has to finally ascend to the region of pure spirit- Satlok or Sat-desh for salvation and redemption. The intervening region between Barhamanda and Sat-desh is full of pitched darkness –also called as Timir Khand, which is an expanse of potent illusion-where darkness appears to be expanding, — and which is understood to exist in an astral form after Daswan Dawar( the tenth door from where the soul goes beyond Brahmanda). Conceptually this darkness is literal and not analogical or metaphorical and not to be confused with darkness of ignorance.  The soul when devoid of mind and matter has its own powerful light-- said to be equivalent to 12 suns. But it gets lost or is engulfed in abyss of intensifying blackness, unless further progression is enabled by potent brilliance of light of the Guru in the Timir Khand.

When Guru Angad Dev Ji experienced the inward ascension of his soul in Timir Khand, full of pitched darkness, he was simultaneously welcomed by the potent brilliance of the light of his Master, Guru Nanak Dev Ji to cross that region of absolute darkness for proceeding to Satlok. Guru Angad Dev Ji, then in a state of astonishment and bliss mentioned/uttered the sacred word of “Waheguru”—the Guru is Unique, Sublime the Greatest-- as a humble obeisance to his Master.

 He described his experience as “जे सउ चंदा उगवहि सूरज चड़हि हजार ॥ एते चानण होदिआं गुर बिनु घोर अंधार (Page 463 SGGS). If a hundred moons were to rise, and a thousand suns appeared, even with such light, there would still be pitch darkness without the Guru”. His words are full of mystical and esoteric connotations. Logically the succession of the subsequent Gurus would have happened likewise.


Monday, June 1, 2015



Tejinder Narang
A 365 days scan of Indian agro- trade reveals a blend of positives and negatives in 2014-15. There is a legacy built by momentum of the past and proactive actions taken this year which augur well for economic reforms. There are also static traditional policies which continue to complicate supply demand mismatch and threaten export realization. With steep fall in crude oil prices, biofuels’ demand stand compressed. This led to retreat in world’s agro-commodities values which have severely dented India’s export competitiveness in wheat, sugar, corn, oil meals. Lower exports also diminish demand pressure. That may keep inflation down but provides poor realization to producers.  
Ironically, India in FY 16 will turn out to be net importer of superior quality wheat estimated at one million tons from consistent exporter since 2011. (Half million tons already contracted at landed prices cheaper than local cost). Imports from Australia, Russia, Ukraine and France are foreseen.  
Wheat and Rice
Shedding political populism, Government wisely hiked MSP of wheat and paddy by a trickle of 4% and shunned extra bonuses gifted earlier both by the Centre and States.   Credit must be given to Food Ministry for reducing grain stocks by managing  procurement and offtake of wheat and rice in central pool from  peak of  60  million tons( mts) in FY13 to 38 mts in FY14 and then to 34 mts in FY15. This implies lower commitment of public funds for surplus stocks, more market availability and sharp drop in inflation to the advantage of macro economy. There are two bullet points which led to such reduction —first, abolition of levy rice policy and second, evacuation of 4 mts of  FCI’s wheat through exports in last two years.  
Eliminating levy rice policy has ensured substantial availability of non-basmati rice in market at lower prices, thereby enabling exports competitiveness. India registered world’s largest rice exports in FY15 at 12 mts while Thailand is tracking at 11 mts in world trade of 42 mts. 
Wheat stockpiles could have been further pushed below by another 2-3 mts had Government not dithered in marginal adjustments in contracting at $290-$299 per metric ton fob and later on at $260-$270 fob range, due to depreciation of rupee from 55 to 61 in last two years.  Niche opportunities were missed by sheer inflexibility in decision making.   
There is no possibility of low quality/lustre loss wheat exports from India in 2015-16 as world prices may dip below $185-$195 per metric ton fob unless authorities demonstrate pragmatism to match international values of shorter shelf life wheat abundantly procured this year. Another paradoxical complexity that Government now encounters is whether low quality wheat will be distributed under TPDS or alternatives will be explored for its disposal, and at what value.
Over supply of sugar (27-28 mts) vs demand (23 mts), bulging carry in stocks of 10 mts and lower prices (-9% from a year ago) are staring with predicaments of scary farmers’ arrears of about Rs 21000 crores, cash losses of 550 millers resulting into rickety financials of the industry, banks burdened with risky liabilities/litigations and exports down to 0.5 mts versus expectation of 2.5-3 mts. Fixing artificial cane pricing by States has been politicised for wooing vote bank.  Neither Centre nor States are willing and keen to set macro-policy right by linking cane cost to marketable value of sugar.
Farmers, even if they remain partly unpaid, continue to produce excess cane because they still make money. Thus more and more sugarcane is going to come out from farms in future with adhocism of annual hikes in SAP. Granting WTO non- compatible export subsidy for raw sugar which Brazil intends to contest, pushing for non- workable proposition for creation of buffer of three mts by the Government from public funds, hike in import duty or chasing mills for payments to farmers are ostrich like solutions. The necessity is to catch the bull of State Advisory Price (SAP) by horns and tame it once for all.   SAP has to be significantly reduced under current market dynamics of sugar in India and abroad. It can be raised up if market conditions so permit. Policy perspective should be prioritized rather than hollow polemics.
India imports about 12-13 mts of edible oil per annum –palm oil constitutes 80% while the balance 20% is soy, sunflower and canola oils etc.  The world prices of edible oils (from Indonesia, Malaysia, Brazil, Argentina, USA) are declining in tandem with fall in values of all agro commodities worldwide.  The wholesale prices are also reflecting the same trend. But domestic industry demands higher import duty to nullify lower cost of imported oil against higher cost of production of oil crushed locally. The culprit is higher seed prices either due to low production attributable to poor yield, lesser area, weather etc. or speculation in future exchanges or hoarding by the farmers etc. Likewise oil meals export is down by 55%.
Why the consumer should pay higher prices of edible oil when world markets are bearish and why Government should become an accomplice with industry for inflation because of drift in oilseeds policy. World’s prices will continue to plunge down with higher yields/ production of GM crops. If our cropping trend remains inconsistent with world’s genetic engineering and bio-technology excellence, sickness in industry is assured. Logically, oilseed production prescription needs to be reviewed for high yielding verities- non GM hybrid types or GM- than to tinker with superficial issues for short term reliefs.
Pulses’ inflation of 15.38 % is the only “black sheep” in the array of commodities while milk, fruits and vegetables are reflecting marginal deflationary disposition which might witness trend reversal from May 2015 due to reports of inclement weather in coming months.   Import Intensity of pulses will be significantly move up (see article “Avoid panic in pulses” FE 25th May 2015 ). 70% of pulses grown are Rabi (winter) crops where gross area of cultivation competes with wheat each year—another Rabi crop. Wheat predominance in sowing area due to dedicated government support-- MSP and procurement-- overshadows preference for growing pulses. Pulses remain the secondary option in sowing.  Four to five million tons of import of pulses by private sector is foreseen with substantive price escalation from Canada, Australia, USA, Myanmar, and some African nations.
Government has to address the issue of disposal of low quality wheat with caution, have the courage to get out of the nightmare of SAP for sugar, take a view on high yielding varieties of oilseeds to augment supply side (of oilseeds) and should not mess up import of pulses by State’s/PSU’s intervention or subsidy.