Indian sugar mills association

Exports of agri commodities in doldrums

Date:	29 Feb 2012

Source:	The Business Standard

Reporter:	Rajesh Bhayani

News ID:	952

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Issues related to quality, prices and global surplus restrict exports from India

Exports of several agricultural commodities have been facing hurdles. Even as quotas for sugar and wheat exports had been raised, the actual figures have not seen any significant rise.

Coffee exports have also faced viability issues, as prices in global markets have been lower than in India and recessionary conditions in Europe have impacted demand. Maize, which initially saw some exports, is now facing quality issues, hurting India`s reputation as a quality exporter.

Cotton exports, on the other hand, have bucked the trend, despite surplus in the global market and slowdown in Chinese buying.

Late last year, export of up to two million tonnes (mt) of wheat was allowed, thanks to a huge surplus in the domestic market. But, even in global markets, supply is much larger than demand, which has led to a fall in prices, making Indian exports unviable. According to the representative of a multinational exporter active in the Indian market, not even half of the export quota has been met till now. According to estimates, only about 500,000 tonnes of wheat have been exported.

“Wheat remains abundant around the world and prices are expected to remain bearish,” said Rabo Bank in a report on agri commodities. India faces a similar situation, as the wheat crop is expected to be robust this season too, at an all-time high of 88 mt.

Availability of sugar in the global markets is not much different. Unless there are end-of-season crop losses, Brazil`s stock is estimated to be in surplus. However, the sweetener has seen some export activity and it is expected that India would soon be able to exhaust the one mt quota. However, permissions for exports are still awaited. Industry leaders say they want to export to dilute the inventory and ensure they do not open the next season with domestic surplus. Sugar prices have improved in London over the past few days and are currently at $665 a tonne.

In case of maize, India`s exports, so far, have crossed one mt and are expected to match last year`s figures of 2.7 mt, as global prices have been higher. The domestic production of the commodity is expected to be 21.6 mt this year.

Amit Sachdev, the India representative of the US Grains Council, said: “Exports from India are still open, but some reports do indicate that there has been a quality issue with some consignments of maize, and this could be one of the reasons for prices to have remained soft for some time.”

There had been reports that some consignments sent by India to Vietnam were rejected after a higher level of moisture and broken maize were found.

Cotton export registrations, meanwhile, have seen a sudden increase in the past few days, despite a global surplus. According to the International Cotton Advisory Committee, “Global cotton production is rising by an estimated seven per cent in 2011-12 to 26.8 mt. This would be the largest level of production achieved in five years. However, the global production could drop to 24.9 mt in 2012-13 due to rising agricultural production costs and lower prices received by farmers this season, improving attractiveness of grain and soybean”.

In India, cotton is currently trading at 10 per cent lower prices than a fortnight ago — at Rs 33,000-34,000 a candy (356 kg) — on expectations the government could cut duties on synthetic yarn, which competes with cotton yarn, in the Budget.

Shirish Shah of Bhaidas Kursondas & Company said: “There are reports that seven million bales (of 170 kg each) have been shipped so far and the total registration with DGFT for exports is understood to have crossed 10 million bales.”

Registrations have gone up sharply in the past few days on the fear that the government could be planning to restrict cotton exports.

Since India has lowered the minimum export price (MEP) for basmati rice, the export of the commodity is expected to pick up. On February 23, the government notified a reduction in MEP from $900 a tonne to $700 a tonne.

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