WTO-DISCORD --30 MILLION TONS OF AGRO EXPORTS AT STAKE -FINANCIAL EXPRESS

 WTO-DISCORD

30 MILLION TONS OF AGRO EXPORTS AT STAKE



FINANCIAL EXPRESS--29TH JULY 2014


 
http://epaper.financialexpress.com/c/3230767


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WTO DISCORD—30 MILLION TONS OF AGRO EXPORTS AT STAKE

Tejinder Narang

The foremost trigger point of WTO’s recent dispute at Geneva is the passage of Indian Food Security Act (FSA) last year. FSA deepens India’s non-compliance of domestic support with WTO guidelines. It will be bizarre to expect that WTO will ever endorse India’s absurd act and more so because it is bound to intensify market distortions within and outside India. Ideas of India endorsing its sovereignty unilaterally, when it affects other sovereign nations are no longer tolerated in globally connected world.  More multilateral hostility will be directed towards India if Trade Facilitation Agreement (TFA) is linked to resolution of domestic support matters. Surely India is not in breach of any “direct trade related subventions”.

FSA when implemented will lead to excessive public procurement, starving local market, higher inflation thereby making exports also unviable. If cereals are distributed with 50% leakages at Rs 2-3 per kg, targeted beneficiaries are not helped but illicit diversion to exports can take place.  Non –supply of information by India on domestic support under peace clause applicable till 2017 as agreed in Bali should not be violated.

At the same time developed nations are merely focusing at WTO compliant local subsidies viz-a –viz India while ignoring any penalty or sanctions on Black Sea countries  for the criminality of Crimea or for downing of MH17 or on act of terrorism elsewhere. Will WTO continue to look other side when China rejects or defaults million tons of corn or soy shipments under phyto- conditions or so called tainted GMO strains? Why Thailand has not been reprimanded for grossly over invoicing paddy procurement, booking unaccounted losses of billions of dollars and now distorting world’s international rice trade? All these are trade related dilemmas and should be comprehensively dealt by WTO.

 Another reason for targeting India is its export of around 54 million tons of agro-commodities in last two years and perception of developed countries’ shrinking market slice.  The decline in share is due to abundantly cheap supplies of corn and soy available from South America caused by extensive cultivation/yield of GMO crops. Likewise cheaper shipments of wheat and corn from Russia/Ukraine have captured their traditional markets with lower unit value realizations. Thus affected nations will use all their might to ensure that rule book of WTO is adhered to.

In 2014-15, Indian shipments may be about 20 million tons (see graphic) due to weaker monsoon but quantum of export may pick up in subsequent years. There is no dumping of Indian agro items in international market, as alleged. On the contrary India has strategized and exploited niche market conditions, while supported by weaker currency. It’s MSP of wheat and rice is aligned with international values. India’s top ranking in rice export, after 2011, is due to messy non- Basmati rice policies of Thailand, logistical advantage with Middle-East and Africa, development and acceptability of high yield pusa 1121 varieties of Basmati rice by IARI and rupee payment facilities with Iran (thrust by USA sanctions). The entire rice export has originated from open market and not from public stock holdings. Where is dumping?

Likewise wheat export is taking place simultaneously both from private market and FCI at prices sometimes better than US/EU/Black Sea/Australia. For exports from FCI, there is a full transparency on export tenders awarded to the highest bidders. Even nominal minimum export price (MEP) of FCI takes into account acquisition costs and logistical expenses minus taxes. Local taxes are never exported and are in fact subject to refund even to private exporters. Wheat export is at even keel with private trade. Where is dumping?

In last 4-5 years corn production has risen from 18 to 22-23 million tons and Indian exports of 3-4 million tons per annum are feasible from private market. Soymeal and rape meal exports of similar tonnages have been regular features by privates.  Only hic-up is a short term decision of raw sugar subsidy which is being reviewed.

Indian Government’s inflexible position on FSA and therefore on TFA is in contradiction to the proclaimed agenda of reform of BJP for PDS and FCI.  Should penal provisions of WTO are applied, about 30 million tons or more of India’s agro exports are at stake. An amicable solution of offering cash transfers has already been made. In addition dispensing arbitrary powers of cargo rejections (as seen in China) , penalising acts of violence (as seen in Black Sea or elsewhere) and castigating those who fix MSP much above market price (as done by Thailand) may also form part of TFA/WTO.

	INDIAN AGRO EXPORTS IN MILLION TONS
	ITEM	2012-13	2013-14	2014-15 (projected)*
1	Wheat	6.8	5	3
2	Rice	11	10	9
3	Corn	4.7	3	2.5
4	Soymeal	4.5	4.4	3
5	Rape meal	0.9	0.75	0.8
6	Sugar	0.96	1.8	1.5
	TOTAL	28.86	24.95	19.8

Source USDA, *projected, author

THREE DIVINE REVELATIONS

THREE DIVINE REVELATIONS


ECONOMIC TIMES 26TH JULY 2014

THREE DIVINE REVELATIONS

Tejinder Narang

A revered priest seated on a high decorated throne is preaching to his followers when a prominent mystic arrives.  The mystic sits humbly on the ground. After a while priest asks “Oh you mystic who claim to be a God’s man, answer three questions?  First, if there is only one God, then who comes before Him. Second, where He lives? Third, what is His profession?

For discussions about esteemed Lord, mystic mentioned, he needs precious and pure stuff like four rubies and a cup of milk. After the needful was done, the priest is asked to count rubies”.  Priest—“One—two –three—four”. Kindly count again, mystic insisted. Again, response was —one, two, three and four. “What comes before the One?” queried mystic. Priest -- “nothing” comes before the One. And so announced the God man, even spiritually there is “nothing” and “nothingness” before One. Everything emerges from the One only.

Then Mystic asked –“What do you see in milk?” White milk only, was the natural answer. Mystic asked, “Do you see butter in milk?” No—but priest admitted that milk contains butter always. Mystic clarified--like butter, God lives and exists, intermingled invisibly in the Creation.

For third enquiry,  mystic suggested that priest may descend from the elevated podium so that sacred profession of Supreme Divinity is proclaimed by him from the high throne.  Priest descended, sat on the floor and Mystic moved up. Mystical response was—“Lord brings down the one on throne and takes lowly one to higher pedestal—just as all of you witnessed now”. He makes kings as beggars and vice versa; fools into pundits; days into nights—He makes the creation move up and down in a circle at His axis- while remaining unaffected.

INDIAN RAINS/MONSOON DELAYED BY A MONTH-- FOOD FRONT LARGELY SAFE

INDIAN RAINS/MONSOON DELAYED BY A MONTH-- FOOD FRONT LARGELY SAFE

Tejinder Narang

Monsoon is a derivative of Arabic word Mawsim or Mausam . “Seasonal Pattern” or “Mausam” is subject to imperceptible but definitive variations. Traditional theory of southwest monsoon -summer rains- occurring in June-September over Indian sub-continent needs better understanding. Even winter rainfall--northeastern monsoon-- instead of limiting to October –December extends till Feb –March.  (Recall delay in harvest of wheat this year)

Temperature differentials on land and sea are not the only causative factors for triggering and bursting monsoons. The current dynamic theory maintains that Monsoon is a global weather phenomenon rather than just a local one.  El-Niño- too remains a tentative forecasting while its fear is exaggerated sometimes—as proven recently.  When seasonal mutations crisscross worldwide, Monsoons cannot remain isolated and localized affair. Even Indian festivals do not occur on same Gregorian calendar dates; they are in sync with seasons.

To what extent Monsoon may have shifted requires a review by IMD/policymakers, but to an ordinary observer this appears to have been deferred by 30-40 days, barring exceptions. Sawan—the month of rain as per traditional Indian calendar, commenced on 13^th July this year.

Based upon experience of Indian trading community of  many years (except last year) who relate antics of trade with weather, it is believed that delay in onset of Monsoon by a month is the new norm. “Sowing starts by early July and is completed by end July—the month of sawan.  The cyclic pattern has changed and we still call it a delay. Clarity on actual sowing will emerge by compilation of data by mid- August.  Media frenzy and over hyped reports of possible drought and parch lands create situation of deep concern for common man which makes official machinery (nervous) creating panic in markets.” Government then acts in an arbitrary   manner—blaming farmers or wholesalers or retailers or “mandis” which is inimical to trade. Random comparison of sowing data kicks speculation of shortages and ascending prices.

At the time of writing this blog on 25^th July 2014, the recovery in shortfall is much faster. Deficiency is about 20%.Water reservoir levels is above 10 year average and heavy down pour is forecast in next few days.  

 Source economic times 25.07.2014

Decline in food inflation

Recent CSO data on CPI reveals that food inflation of cereals and fruits/ vegetables has declined between September 2013 to June 2014 from 12.8% to 7.6% and from 28.4% to 11.8% respectively. In % terms this decline is -41% and -58%. Only prices of milk and its products have climbed by 35%. Though prices jumped in absolute terms, but rate of rise is reined. This is despite the market scare of deficient rainfall—though common man may not appreciate this statistical jargon due to strong base effect. Neither media nor official agencies are able to highlight this tapered down trend.  

Source  Crisil Author

 

Food front

Despite sensational reports of weaker monsoons, there is no need to panic. Wheat is a rabi crop (winter)  of 93 million tons (mts). It is not exposed to draught any way and we carry about 40 mts with FCI as of 1^st July2014.

India produced 103 mts of rice in FY14. Government carries 28mts of milled rice on 1^st July 2014.  Kharif Rice output—which is 85% of country’s production-- is well distributed in Punjab/Haryana (well irrigated) Uttar Pradesh, West Bengal, Bihar, Chhattisgarh, Jharkhand, AP, MP, Tamil Nadu, and Kerala. There could be marginal decline of 3-4%, which can be covered in the Rabi rice crop. Rice’s Rabi crop supports 15% of overall output. Supply side of minimum 100 mts of rice plus stocks of 28 mts vs  annual demand of 95 mts provides self-sufficiency for this critical crop.

Enough sugarcane will crystallize 25 mts of sugar in 2014-15 with about 7 mts of carry over. Supply of 32 mts sweetner against consumption of 23 mts is indicative of surplus/ bearishness. India’s cotton stocks are estimated at 3.3 million bales (mbs) as of October 2014 and lowest estimated produce could be 35 mbs, while higher side could be 38-39 mbs. With minimum total availability of 38.3 mbs and domestic usage of 31 mbs, local market will again be surplus/ bearish.

Availability of Oil seeds and pulses could be lower.  Chana or Chick pea which is about 50% of pulse complex grows in rabi season and thus insulated from Monsoons. Edible oils and lentils/yellow peas in any case have an annual import component of 11mts and 3mts respectively. World markets of these items are plunging sharply; astute private players manage imports very efficiently. Thus, any 5%-10% increase in import of edible oils and pulses is a routine trading activity. Short term spike in fruit and vegetables front is seasonal and likely to settle down as usual.