Agiculture Report Apr June 2013

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About the Project

The need for monitoring and analysis of emerging food scenarios is important for India both because ofsignificant dependence of output on the monsoon rains and the fact that globally India is one of the majorconsumers of food crops influencing markets. Management of agriculture from a public policy perspectiverequires organisation of this information and analysis as inputs to policy making.

Against this backdrop the National Food Security Mission (NFSM), Ministry of Agriculture, commissioned a3Year study to National Council of Applied Economic Research (NCAER) in 201112 to bridge thisimportant gap in analytical inputs for understanding the emerging agricultural scenarios both in the short-termof one or two quarters and also in the medium to longer term.

Accordingly, the agricultural outlook and scenario analysis undertaken in this study refers to the main cropbased food items: cereals (specifically rice, wheat, jowar, bajra, maize and overall coarse grains), pulses (gram,tur), selected fruits and vegetables (banana, potato, onion), sugarcane and edible oils (groundnut, rapeseed/mustard, soybean). In addition the analysis also covers milk, one livestock product.

The three main outputs of the proposed work will be:

(1) A Quarterly Agricultural Outlook Report that integrates the assessment of key indicators relating toagriculture with a focus on food sectors. The reports will include assessment of the current situation oninputs, output and market conditions and also forecasts of key indicators for the full year based on modelsdeveloped for the purpose.

(2) A Semi-annual Agricultural Outlook and Scenario Analysis Reportwhich provides a longer termperspective for the food sector.These reports will present an analysis of alternative scenarios of output andconsumption for the food crops taking into account the available information and based on the suitableeconomic models that permit longer term projections.

(3) Monthly briefings on the prevailing agricultural conditions.

Implementation

NCAER has set up a study team to carry out the study

An advisory committee has been formed to provide broad guidance to the implementation of the study. TheCommittee comprises of Dr Shekhar Shah, DG, NCAER as Chair, Dr Ashok Gulati, Chairman, Commissionon Agricultural Costs and Prices, Prof. Ramesh Chand, Director, National Centre for Agricultural Policy(NCAP), New Delhi, Prof. Mahendra Dev, Director, Indira Gandhi Institute for Development Research(IGIDR), Mumbai, Mr Mukesh Khullar, Joint Secretary (Crops), Ministry of Agriculture and Mrs. S. Bhavani,Principal Adviser, Ministry of Agriculture. Representative from FAO and DFID are Special Invitees to theCommittee meetings.

A Technical Support Group comprising of key officers from different departments of the government andexperts has also been formed to interact with the study team to improve the work under the study.


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Agricultural Outlook andSituation Analysis Reports


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AGRICULTURAL OUTLOOK AND SITUATION ANALYSIS REPORTS

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Agricultural Outlook andSituation Analysis Reports

Quarterly Agricultural Outlook ReportAprilJune 2013

Under the Project Sponsored byThe National Food Security Mission

Ministry of Agriculture

June, 2013

Prepared by

National Council of Applied Economic Research

11, I.P. Estate, New Delhi 110 002


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Growth of GDP from agriculture and allied sectors in constant prices in 201213 has beenestimated at 1.9 per cent over the previous year, lower than 3.6 per cent in the previous

year.

The third advance estimates place foodgrain production in 201213 at 255.4 milliontonnes, about four million tonnes lower than the final estimates for 201112. The rabiharvest benefitted from the pickup in rainfall in the later months of the monsoon periodin 2012.

The outlook for 201314 is positive with a number of indicators being favourable for agood harvest. Forecast of a near normal monsoon rainfall this year is a critical leadingindicator of a positive outlook for agriculture this year.

The output price environment has been positive for the outlook. Prices of major foodcommodities in the international markets have shown moderating trend following highlevels seen in the second half of 2012. Improved global production in the case of majorgrains and vegetable oils has meant higher year end stocks and stability in prices. Only inthe case of dairy products, prices are expected to remain at a higher level.

The minimum support prices (MSP) for kharif crops have been set to maintain incentivesfor food production and address the need to raise production of pulses and oilseeds: in thecase of rice, the MSP has been raised by 4.8 per cent and in tur (arhar) by 11 per cent andsoybean even greater by 13-14 per cent.

Among the concerns input prices are important ones, particularly energy and labour.While consumer level subsidies make the price rise seen in the case of diesel and electricityat the wholesale level less sharp, continued rise in Consumer Price Index (CPI) may raiselabour costs. Depreciation of the rupee and rising energy prices will also have implicationsto fertiliser subsidies.

Based on the expected normal monsoon rainfall in the current year, the present outlookreport estimates kharif foodgrain production of 130.6-135.2 million tonnes as comparedto 128.3 million tonnes in 201213. Soybean production is estimated at 14.1-14.9 milliontonnes, nearly the same level as in 201213.

Sugarcane production is projected to increase to 339.8-347 million tonnes up from 336.1million tonnes in the previous year. Potato, onion and banana production is projected to

increase from the last years levels. Milk production is projected to increase from 132.1million tonnes in 201213 to 137.7-138 million tonnes in 201314.

The food price index comprising of WPI of food articles and food products, is projectedto continue to reflect an increase of 8-9 per cent, year on year basis, in the next threemonths. Although price rise is seen to be moderating across a number of commodities, theprice level remains high as compared to the prices prevailing a year back.

Although stocks of rice and wheat with the government on June 1 2013 at 77.7 milliontonnes are lower than its level on June 1 last year, it is still well above the needs of PDS

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and buffer requirements. The overall supply-demand balances point to adequate suppliesto meet normal domestic and export demand. The overall output price conditions in themarket continue to signal the need for improving market infrastructure and productivityto achieve stable price conditions.


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The study team wishes to place on record the guidance, support and assistance receivedfrom a number of organisations and individuals. Mr. Ashsih Bahuguna, Secretary,Department of Agriculture and Cooperation has been very supportive of the work and hasencouraged us in the conduct of the study. He presides over the monthly briefings whichprovide new insights to our work on outlook assessment. Mr. Mukesh Khullar, JointSecretary (Crops) and Mission Director, NFSM is a source of constant encouragement inall stages of the study. A number of officials from the Ministry and DES have provideddata, opportunities for interaction and guidance in the course of the study. Dr. B.Gangaiah, Economics and Statistics Adviser, Directorate of Economics and Statistics,Nodal Officer for the study, has encouraged us in our work providing feedback and data

whenever requested.

Mrs. S. Bhavani (Ministry of Agriculture), Prof. Ramesh Chand (NCAP), Prof. MahendraDev (IGIDR), Dr. Ashok Gulati (CACP), Mr. Mukesh Khullar and Dr. Shekhar Shah(NCAER) have provided guidance as members of the Advisory Committee and Dr. PeterKenmore (FAO) as Special Invitee to the Advisory Committee meetings. The TechnicalSupport Group (TSG) set up for the study has included a number of officials and alsoother experts.

Reports of USDA, FAO and Department of Agriculture and Cooperation have beenmajor sources of data and information for the report. We have used information and datafrom a number of other sources also. We have noted the specific references used for ourassessment of outlook in the report.

A number of experts made presentations in the monthly briefings. We acknowledge theirsupport as they shared their experience and knowledge on different aspects of assessmentof agricultural outlook.

Acknowledgements

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Study Team

Shashanka Bhide (Project Leader), A. Govindan, Saurabh Bandyopadhyay, LaxmiJoshi, S.K. Mondal, V.P. Ahuja, Mondira Bhattacharya, Charu Jain, Amar Singh,Palash Barua, Sujoy Kumar Mojumdar, Aditi Jha, Praveen Sachdeva, Prem MohanSrivastava, Himani Gupta, Rahul Thakur and D.V. Sethi.


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Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .v

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix

Acknowledgements and Study Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xi

List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xv

List of Boxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xvi

List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xvii

I. Overview of Agricultural Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

II. Global Economic Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

III. Overview of the Domestic Food Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

IV. Commodity Outlook Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

IV.1 Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

IV.2 Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

IV.3 Coarse Grains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

IV.4 Pulses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

IV.5 Edible Oilseeds and Oils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58

IV.6 Sugarcane and Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64

IV.7 Potato . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68

IV.8 Onion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76

IV.9 Banana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82

IV.10 Milk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87

V. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93

Contents

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I.1 Monsoon scenario for 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

I.2 Kharif 201314 Crop Forecast (million tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

I.3 Production of potato, onion, banana and milk in 201213 and 201314 . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

I.4 Trends in the prices of food commodities, food products and farm inputs WPI, % YOY . . . . . . . . . . . . . . .6

I.5 Trends in the prices of inputs % YOY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

I.6 MSPs for kharif crops % change, YOY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

I.7 Projections of WPI Based on ARIMA models % Change Year on Year . . . . . . . . . . . . . . . . . . . . . . . . . . .10I.8 Projections of Wholesale Prices in Delhi Based on Harmonic Analysis % Change Year on Year . . . . . . . .10

I.9 Food Balances 201314 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

II.1 Global Production Forecasts for Major Food Commodities (Million Tonnes) . . . . . . . . . . . . . . . . . . . . . .16

II.2 CBOT Futures Price Quotes US$/MT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

III.1 Agricultural Outlook Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

III.2 Kharif 201314 Crop Forecasts (million tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

III.3 Year-on-Year Inflation Trend in Major Food Commodities WPI % change . . . . . . . . . . . . . . . . . . . . . . . .34

III.4 Agri- Policy Developments During April June, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

IV.1.1 Government operations in Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

IV.1.2 Supply and Demand Balance for Rice (1000 Tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

IV.2.1 Supply and Demand Balance for Wheat (1000metric tonnes) marketing year . . . . . . . . . . . . . . . . . . . . . . .48

IV.3.1 Demand Supply Balance Sheet for Maize (000 tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

IV.4.1 Imports of Pulses by Type and Major Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

IV.4.2 Demand and Supply Balance Sheet for Pulses (000 tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57

IV.6.1 State wise Area, Production and Yields of Sugarcane (201112 and 201213) . . . . . . . . . . . . . . . . . . . . . .66

IV.6.2 Sugar Supply and Demand (000 tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67

IV.7.1 Area, Production and Yield of Potato in Major Producing States 201213 . . . . . . . . . . . . . . . . . . . . . . . . .69

IV.7.2 Potato Supply and Demand (000 tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70

IV.7.3 Futures Prices of Potato . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75

IV.8.1 Area, Production and Yields of Onion for Major Producing States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77

List of Tables

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IV.8.2 Onion Supply and Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77

IV.9.1 Area, Production and Yield of Banana in the major producing states and all-India Level . . . . . . . . . . . . . .83

IV.9.2 Banana Supply and Demand (000 tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83

IV.10.1 Production of milk by States (000 tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88

List of Tables

II.1 International Ag Policy Developments Likely to Impact India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

III.1 Assessing Agricultural Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

List of Boxes

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I.1 GDP Growth - Agriculture vs. Overall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

I.2 Share of Agriculture & Allied Sectors in Overall GDP in Constant (200405) Prices . . . . . . . . . . . . . . . . .2

I.3 Agricultural Production Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

I.4 Rainfall in Monsoon 2013 to be better than Monsoon 2012 (% of LPA) . . . . . . . . . . . . . . . . . . . . . . . . . . .4

I.5 Trends in International Prices FAO Food Prices Indices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

I.6 Comparison of domestic (WPI) and international (US$) commodity price trends % YOY . . . . . . . . . . . . .9

II.1 Global Price Trends of Major Food Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

II.2 Stocks-to-Use Ratio of Major Ag Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21III.1 Food Inflation Exceeds Overall Inflation Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

IV.1.1 Year on Year Increase in Rice Wholesale Price Index % YOY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

IV.1.2 Basmati Rice Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

IV.1.3 Parboiled Rice Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

IV.1.4 Other Rice Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

IV.1.5 Broken Rice Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

IV.1.6 Rice Export Price India vis-a-vis International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

IV.1.7 Government rice stocks actual vis buffer Norm (million tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

IV.2.1 Trend in Wheat Procurement by State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45IV.2.2 Wheat Price Inflation WPI (% YOY) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46

IV.2.3 Wheat Exports by Major Destination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

IV.2.4 Indian Wholesale Wheat Price vis--vis US SRW Wheat Price FOB . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

IV.2.5 Government Wheat StocksActual Vs Buffer Norms (million tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

IV.3.1 Coarse Grain Production Trend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

IV.3.2 Maize price comparison US vs. India (US$/tonne) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

IV.3.3 India Maize Exports by Destination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

IV 4.1 Production Trend of Pulses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52

IV.4.2 Kharif, Rabi and Total pulses production trend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52IV.4.3 Per capita net availability of pulses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

IV.4.4 Price Trends in Total Pulses, Gram and Arhar WPI % Change YOY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54

IV.4.5 Price Trends in Moong, Lentil and Urd WPI % Change YOY, 2013 over 2012 . . . . . . . . . . . . . . . . . . . . .54

IV.4.6 Gram Prices in Different Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

IV 5.1 All India Season-wise Area, Production and Yield of Nine Oilseeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58

IV.5.2 Area, production and Yield growth rates of Nine oilseeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59

List of Figures

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IV.5.3 Edible oil Production and Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60

IV.5.4 Oilseed and Vegetable Oil Price Inflation (YoY % Change) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61

IV.5.5 Whole price index of Rapeseed and Mustard, Palm oil and International Price ofPalm Oil (YOY % Change) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61

IV.5.6 Total Imports of Edible Oils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62

IV.5.7 Share of different oils in Total Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62

IV.5.8 Export of Oil meals and Castor oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63

IV.6.1 Area, Production and Yield of Sugarcane . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64

IV.6.2 Sugarcane and Sugar Production in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65

IV.6.3 Percentage change in sugarcane production in 201213 over 201112 . . . . . . . . . . . . . . . . . . . . . . . . . . . .66

IV.6.4 Per Capita Consumption of Sugar across Countries (TE2011) (Kg) . . . . . . . . . . . . . . . . . . . . . . . . . . . .67

IV.6.5 WPI Sugarcane and Sugar % change month over previous month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68

IV.7.1 Area, Production and Yield of Potato in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69

IV.7.2 Price trends in potato over a longer time horizon Annual average WPI . . . . . . . . . . . . . . . . . . . . . . . . . . .71

IV.7.3 Recent Price trends in Potato . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72

IV.7.4 Wholesale Prices of Potato in Metro Cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72

IV.7.5 Retail Prices of Potato in Metro Cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73

IV.7.6 Per Day Average Arrivals of Potatoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74

IV.8.1 Area Production and Yields of Onion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76

IV.8.2 Wholesale Prices of Onion in Metro Cities (Rs/Quintal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78

IV.8.3 Retail Prices of Onion in Metro Cities (Rs/Quintal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79

IV.8.4 Wholesale Price Index of Onion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79

IV.8.5 Per Day Average Arrivals of Onions (Tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80

IV.9.1 Area, Production and Yields of Banana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82

IV.9.2 WPI of banana % change YOY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84

IV.9.3 WPI of banana % change month over month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84

IV.9.4 Wholesale and Retail Prices of Banana in Delhi (Rs/Dozen) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85

IV.9.5 Per Day Average Arrivals of Bananas (Tonnes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86

IV.10.1 Annual growth rate of milk production and monsoon rainfall relative to long periodaverage or normal rainfall during JuneSeptember . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88

IV.10.2 Procurement and marketing of milk by the cooperative sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89

IV.10.3 WPI for milk and Eggs, fish and meat % change over the previous year . . . . . . . . . . . . . . . . . . . . . . . . . . .90

List of Figures

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I.1 Backdrop

The quarterly reports on Agricultural Outlook and Situation Analysis are prepared by theNational Council of Applied Economic Research under a project commissioned by theNational Food Security Mission, Ministry of Agriculture.The first report in the series wasreleased in June 2012 and the present report is the fifth quarterly report. The reports coverselected commodities such as rice, wheat, maize, gram and tur among foodgrains,groundnut, soybean and rapeseed and mustard among oilseeds, potato, onion and bananaamong horticultural crops, sugarcane and sugar, and milk.The main outputs of the project

are,i. Quarterly reports on commodity outlook focusing on the short term prospects

ii. Semi-annual reports on medium-term prospects for the commodities and

iii. Monthly briefings on prevailing agricultural conditions in the Ministry of Agriculture

The present report provides an assessment of the prospects for kharif season output for themajor food commodities for the current year. It also updates the estimates of productionfor 201213 based on the Third Advance Estimates of Production available from theMinistry of Agriculture. In addition, estimates of production are also reviewed for threehorticultural crops and milk. Various components of outlook review are organised in fivechapters. An overview of the report is provided in the first chapter. We provide an

assessment of the global scenario of the food commodities in the second chapter coveringprospects for production, trade and prices drawing implications to Indias food sector. Inchapter III, we present an assessment of the domestic conditions affecting supply-demandbalances for the selected commodities. Commodity specific discussion is provided inChapter IV. The final chapter presents concluding remarks.

I.2 Agricultural Growth Slows in 201213

There has been an upward revision in the production of some of the major crops reflectedin the governments Third Advance Estimates (AE) over the Second AE. However, theGDP from agriculture and allied sectors in 201213 has shown only a modest growth of1.9 per cent in real terms against 3.6 percent in 201112 (Figure I.1). The official

estimates now place overall GDP growth rate in 201213 at 5.0 percent against 6.2 percentin the previous fiscal year (Figure I.1). The GDP share of agriculture and allied sector isestimated at 13.7 per cent in 201213 against 14.1 per cent in 201112 (Figure I.2).

PART I

Overview of Agricultural Outlook

1

The GDP share ofagriculture andallied sector isestimated at 13.7 percent in 201213against 14.1 per centin 201112.


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The Third AE of production of major crops in 201213 brought out by the Ministry ofAgriculture in April 2013 shows an upward revision in the production of rice, wheat, pulses,soybeans,and sugarcane to the earlier estimates in February 2013.Accordingly, the 201213rice and wheat production are estimated to be only marginally down from the 201112record levels despite the weak monsoon of 2012.The foodgrain production of 201112 wasalso revised from an initial estimate of 250.42 million tonnes (Second AE) gradually to259.32 million tonnes in the final estimates brought out in February 2013 (Figure I.3).

While 201213 production of coarse grains, oilseed, and sugarcane, registered marginaldeclines over 201112 pulse production is estimated at a near record 18 million tonnes,thanks to a record gram production of 8.5 million tonnes in the rabi season. 201213 total

foodgrain production is estimated at 255.4 million tonnes against 250.1 million tonnes inthe Second AE.


The Third AE ofproduction of majorcrops in 201213brought out by theMinistry ofAgriculture in April2013 shows anupward revision inthe production ofrice, wheat, pulses,

soybeans, andsugarcane to theearlier estimates inFebruary 2013.

2

Figure I.1: GDP Growth - Agriculture vs Overall

Figure I.2: Share of Agriculture & Allied Sectors in Overall GDP in Constant (200405) Prices


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I.3 Agricultural Production Outlook for 201314

Monsoon rainfall is one of the critical factors influencing Indias production prospects forfood commodities. Besides rainfall, the price environment for output and inputs faced bythe farmers, input availability conditions, marketing infrastructure, policies for the sector,and global trade environment also determine the overall outlook for the food commodities.

A review of a number of factors presented in Chapter III shows that out of the 22 factorsconsidered, the scenario is positive in 11 indicators, adverse in seven and uncertain in four.

A more specific assessment based on a regression model framework which reduces thelarge number of indicators to just two: fertiliser consumption and rainfall indicatesimproved outlook conditions in 201314 as compared to 2012.13.

The forecast for 2013 by the Indian Meteorology Department has been one of normalrainfall during the monsoon season JuneSeptember. While floods have always damagedstanding crops or delayed plantings and weakened normal farming operations, this year the

heavy rains and floods in the state of Uttarakhand in June inflicted massive loss of humanlife and property. The floods in the north east also require strategies that minimise theadverse impact on crop production besides measures to save life and property.

The forecast for the current monsoon period is that the overall rainfall would be 98 percent of the Lang Period Average (LPA) or the normal. In comparison the actual rainfallduring the monsoon period of 2012 was 92 per cent of LPA. The rainfall this year is,therefore, expected to be more copious than last year (Figure I.4).

OVERVIEW OF AGRICULTURAL OUTLOOK

3

The forecast for thecurrent monsoon

period is that theoverall rainfall

would be 98 per centof the Lang PeriodAverage (LPA) or thenormal. Incomparison theactual rainfall duringthe monsoon periodof 2012 was 92 percent of LPA. The

rainfall this year is,therefore, expectedto be more copiousthan last year.

Figure I.3: Agricultural Production Trends

Rice Wheat C.Grains Pulses Total Sugarcane Potato Onion Bannana Milk

Oilseeds

200809 99.18 80.68 40.03 14.57 27.72 285.03 34.40 13.57 26.20 112.20

200910 89.09 80.80 33.55 14.66 24.88 292.30 36.60 12.16 26.50 116.40

201011 95.98 86.87 43.40 18.24 32.48 342.38 42.30 15.12 29.80 121.80

201112 105.31 94.88 42.04 17.09 29.80 361.07 41.48 17.51 28.46 127.90

201213 # 104.22 93.62 39.52 18.00 30.72 336.15 42.48 16.82 30.28 132.10

# Third Advance Estimates in the case of rice, wheat, coarse grains, oilseeds and sugarcane; First AE in the case of potato, onion and banana; and ourassessment in the case of milk.


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The actual rainfall in June this year has been higher than forecast for the country as awhole (Table I.1).

Rainfall in July 2013 for the country as a whole is projected to be 101 per cent of LPA andin August 96 per cent of LPA. Taking into account the relatively higher rainfall in Juneand July, the second half of the monsoon period may see lower rainfall as compared to thenormal. This pattern is in contrast to the one seen in 2012 where the first two months sawlower rains and the second half experienced above normal rains.

The timely onset of the monsoon and generally well distributed rains so far along with theexpectation of good rainfall for the season as a whole provide positive outlook for thekharif harvest. Based on rainfall and a trend variable, we have projected a range of output

of major food commodities for kharif 2013. A range of output projections were arrived atusing alternative set of equations.The projected output levels for 2013 kharif are presentedin Table I.2 along with the current official estimates for 201213.


4

Taking into accountthe relatively higherrainfall in June and

July, the second halfof the monsoonperiod may seelower rainfall ascompared to the

normal.

Figure I.4. Rainfall in Monsoon 2013 to be better than Monsoon 2012 (% of LPA)

Table I.1: Monsoon scenario for 2013

Region Rainfall % of normal

Actual Forecast Actual

JuneSept June 12 Jul 12 Aug 12 Sep 12 JuneSep June 13

2012 2013

Northwest 93 31 74 116 124 94 211

Central 96 61 96 100 120 98 163

South Peninsula 90 71 81 115 93 103 127

North-East 89 99 87 74 106 98 65

All India 92 72 87 101 112 98 129

Source: Based on Indian Meteorology Department publications/ data in their website.


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Projected production of potato, onion, banana and milk for the full year 201314 aresummarised in Table I.3.

At the global level, initial global production and price forecasts for 201314 by majorinternational and national agencies point to replenished supply situation- after last yearssetbacks in some crops- for all major commodities such as wheat, rice, coarse grains,

oilseeds, vegetable oils, and sugar provided weather remains normal through harvest.

I.4 The Price Environment

The output price conditions have moderated somewhat from the situation that prevailedin the last two years. The overall WPI for food articles rose by close to 9.9 per cent in201213 and food products by 8.1 per cent. In the first three months of 201314, the rateof increase in food articles dropped to 6 per cent in April before rising to 8.3 per cent inMay and then further to above 9.7 per cent in June (Table1.4).

In the case of food products the year on year increase in WPI during AprilJune wassteadier at about 6.7 per cent, well below the average for 201213. The higher rate ofincrease in the WPI for primary articles in AprilJune 2013 is on account of cereals and

vegetables. The price rise in the case of rice, wheat, bajra and maize among foodgraincrops remains a concern as the year on year rate of increase in these cases is high. Thehigh rate of price rise in cereals is also reflected in the double digit rate of increase inthe case of grain products.

Among the vegetables, onion prices have nearly doubled in the first three months of201314 as compared to the same period last year. However, the group level index for

vegetables was below 5 per cent mark rising to double digit rate in June. In the case ofgroup level index for fruits was below 5 per cent mark although the price index for


5

At the global level,initial globalproduction and price

forecasts for201314 by majorinternational andnational agenciespoint to replenishedsupply situation-after last yearssetbacks in somecrops- for all majorcommodities such as

wheat, rice, coarse

grains, oilseeds,vegetable oils, andsugar provided

weather remainsnormal throughharvest.

Table I.2: Kharif 201314 Crop Forecast (million tonnes)

Crop 201213 3rd Advance Estimates Projected Kharif 201314

Rice 92.8 94.2 -95.1

Maize 16.1 16.6-16.8

Bajra 8.7 9.0-9.7

Jowar 2.7 2.6-2.7

Other coarse grains 2.0 2.2-3.8

Pulses 6.0 6.0-6.1

Total Kharif foodgrain 128.3 130.6-135.2

Groundnut 3.5 3.5-5.0

Soybean 14.1 14.1-14.9

Sugarcane 336.1 339.8-347.0

Note: The 201314 Kharif production has been derived based on trend growth rate and the monsoon rainfall deviation from the LPA. In the case ofrice an intercept dummy variable is used for 201112 onwards to reflect the rise in output that was not captured by the trend and may reflect some ofthe shifts in production across states besides productivity improvements.

Table I.3: Production of potato, onion, banana and milk in 201213 and 201314

Commodity 201213 (First Advance Estimate) 201314 (Projected)Potato 42.5 44.0

Onion 16.8 18.0

Banana 30.3 31.4

Milk 132.1* 137.7-138.0

Note: *Outlook report estimate.Assessment based on rainfall and trend growth. Only one set of equations were used to estimate production in the case of potato, onion and banana.In the case of milk, average growth rate in production in years of rainfall within 5 p cent of normal was used for projection of output in 201314.


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banana was registering double digit rate in AprilJune period.

The edible oil prices have remained stable with a good rapeseed/ mustard harvest andadequate supplies of vegetable oils in the international markets.

In the case of sugar, price trends have moderated from the experience of 201213 asthe industry is carrying large stocks from the previous year.

Milk price has remained within 5 per cent increase in the first quarter of 201314 afterit had declined to 7.24 per cent in 201213 from the double digit increase in theprevious year.

The overall output price conditions in the market continue to signal the need forimproving market infrastructure and productivity to achieve stable price conditions.


6

The overall outputprice conditions inthe market continueto signal the need forimproving marketinfrastructure andproductivity to

achieve stable priceconditions.

Table I.4: Trends in the prices of food commodities, food products and farm inputs: WPI, % YOY

Items 201112 201213 201314

Output prices Apr May June Apr June

Food Price Index 7.24 9.28 6.49 7.64 8.60 7.58

Food Articles 7.30 9.90 6.08 8.25 9.74 8.03

Food Products 7.12 8.13 7.27 6.50 6.41 6.72

Cereals 3.87 13.42 15.52 16.01 17.18 16.24

Rice 3.05 12.69 17.09 18.48 19.11 18.23

Wheat -1.84 15.51 13.55 12.65 13.83 13.34

Jowar 31.13 -5.13 6.93 4.44 4.67 5.34

Bajra 10.04 20.84 25.87 25.51 26.51 25.96

Maize 21.72 13.81 10.87 11.97 16.56 13.11

Pulses 2.52 19.57 10.52 5.95 1.59 5.92

Gram 29.21 37.43 4.49 -2.23 -9.20 -2.57

Tur -10.66 8.82 20.63 16.86 14.16 17.15

Groundnut seed 21.36 23.45 16.85 11.03 5.54 11.12

Rapeseed & Mustard seed 10.86 35.31 8.60 2.89 4.91 5.43

Soyabean 9.65 50.49 31.80 22.91 11.05 21.49

Vegetables -1.95 17.20 -8.88 4.85 16.47 4.28

Potato -2.25 60.46 -0.63 -3.44 -14.22 -6.75

Onion -28.09 24.56 90.83 97.40 114.00 101.31

Fruits 14.21 1.30 0.56 0.97 -0.43 0.38

Banana 6.39 21.39 26.51 11.94 11.29 16.10

Groundnut oil 12.79 17.55 9.29 4.88 1.57 5.23

Rapeseed & Mustard Oil 16.85 13.49 -1.06 0.20 0.46 -0.13

Palm oil 7.58 4.21 -6.47 -6.71 -4.32 -5.84

Edible oils 12.55 9.13 2.01 0.75 0.00 0.92

Sugar 5.11 11.33 8.67 7.33 7.21 7.73

Grain mill products 0.27 6.71 11.04 13.82 12.93 12.59

Milk 10.31 7.24 4.04 4.46 3.74 4.08


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The input prices are, however, a concern especially in the case of energy inputs. The WPIfor electricity and diesel has increased at double digit level in the first two months of the

year. While subsidies in the case of electricity offset the price increase, increase in dieselprices affect cost of inputs to the farmers. The double digit increase in consumer priceindex puts pressure on wage rates. The depreciation of the rupee would affect fertiliserprices and more importantly the subsidies. Following a depreciation of 13.4 per cent in

201213 (rupees to dollar), there was further depreciation of 3.6 per cent of the rupee inthe first quarter of the year (Table I.5).

The MSPs for kharif 2013 season provide a framework for stability in prices for the maincommodities. In the case of rice, the support price has been increased by less than 5 percent. Among the coarse grains, bajra price has increased by 6.4 per cent over the MSP in201213 and in the case of maize, the increase is 11.5 per cent. Among the kharif pulses,MSP has been increased by 11.7 per cent in the case of tur and there is no increase forUrad (Table I.6). Kharif oilseed support prices have been increased relatively more than inthe case of cereals. The overall increase in MSPs has been in line with the expectations of

lower rate of inflation in the economy in the current year.

The overall output price conditions in the market continue to signal the need forimproving market infrastructure and productivity to achieve stable price conditions.


7

The input prices are,however, a concernespecially in the case

of energy inputs. TheWPI for electricityand diesel hasincreased at doubledigit level in the firsttwo months of the

year. Whilesubsidies in the caseof electricity offsetthe price increase,increase in diesel

prices affect cost ofinputs to thefarmers. The doubledigit increase inconsumer priceindex puts pressureon wage rates.

The MSPs for kharif2013 season providea framework forstability in prices forthe maincommodities.

Table I.5: Trends in the prices of inputs: % YOY

Items 201112 201213 201314

Input prices (WPI) Apr May June Apr June

Fertilizers 13.5 12.4 7.1 7.1 4.92 6.36

Diesel 8.5 11.6 20.6 21.2 22.77 21.49

Pesticides 1.1 5.5 2.6 3.0 5.09 3.57

Manuf. Prod 7.3 5.4 3.7 3.1 2.75 3.18

Electricity (Agriculture) 5.1 21.8 36.2 36.2 11.12 26.66

WPI All Commodities 8.9 7.4 4.8 4.7 4.86 4.78

Other indicators

CPI Agricultural labour 8.2 10.0 12.3 12.7 NA 12.51*

Exchange rate (Rs/ USD) 5.1 13.4 5.1 1.2 4.4 3.6

Note: AprilMay

Table I.6: MSPs for kharif crops: % change, YOY

Crop 201112 201213 201314

Paddy ( common) 8.00 15.74 4.80

Jowar (Hybrid) 11.36 53.06 0.00

Bajra 11.36 19.90 6.38

Maize 11.36 19.90 11.49

Ragi 8.81 42.86 0.00

Tur 6.67 20.31 11.69

Moong 10.41 25.71 2.27

Urad 13.79 30.30 0.00

Groundut in shell 17.39 37.04 8.11

Soybean black 17.86 33.33 13.64

Soybean yellow 17.36 32.54 14.29


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I.5 Assessment of food commodity prices in the shortterm

The cues from global market prices are that prices have come down in 2013 as comparedto the second half of 2012 except for the case of dairy products. The FAO food price index

declined in May and June as compared to April this year.The decline in sugar prices indexis the steepest among the five sub-groups of the FAO Food Price Index (Figure I.5). Theearly June CBOT price quotes also show a weakening of prices for most commodities inthe short term reflecting improved crop prospects in 201314.

The trends in WPI for food commodities in the recent three months have shown signs ofmoderation barring the case of rice and vegetables, particularly onion. Comparison withthe international prices shows that except for wheat and groundnut oil, the prices in theinternational markets rose at a lower rate than in the domestic market (Figure I.6). Therupee depreciation will add to the increase in international prices and will generallyaccentuate the domestic price rise.


8

The FAO food priceindex declined inMay and June ascompared to Aprilthis year. The declinein sugar prices indexis the steepestamong the five sub-groups of the FAO

Food Price Index.Figure I.5: Trends in International Prices: FAO Food Prices Indices


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We have examined the evolution of price trends at the wholesale level in the next 3-4months using data for the specific market of Delhi and at the aggregate national level

(WPI). Two approaches were adopted for the short term projections as we had done in ourquarterly report for JanuaryMarch 2013. The projections are summarised in Tables I.7-I.8.

Key findings are,

Projection of price trends in short run suggests that price pressures are likely tomoderate in the short term in the case of wheat, jowar, bajra and pulses amongfoodgrains.

In the case of rice, although the rate of increase is moderating, the price rise over thelast year is significant.

In the case of oilseeds and oils also prices are expected to show declining trend basedon year on year trend.

In the case of onion prices are expected to show significant fluctuations and showcontinued high rate of increase year on year basis. Potato prices are projected to showdecline, year on year basis but likely to rise over the next three months.

For the food sector as a whole, rate of increase of 7.4-7.5 per cent is expected in theperiod JulySeptember with food articles keeping the upward pressure on prices.


9

Projection of pricetrends in short run

suggests that pricepressures are likelyto moderate in theshort term in thecase of wheat, jowar,bajra and pulsesamong foodgrains.

Figure I.6: Comparison of domestic (WPI) and international (US$) commodity price trends: % YOY

Rice Wheat Maize Banana Groundnut R & M Palm Sugar Soyabean

oil Oil oil

Apr 13 17.1 13.9 11.4 26.5 2.2 -2.8 -7.2 8.9 31.8

May 13 18.5 12.6 12.0 11.9 4.9 0.2 -6.7 7.3 22.9

June 13 19.1 13.8 16.6 11.3 1.6 0.5 -4.3 7.2 11.1

Apr 13* -2.2 9.2 10.3 -18.5 38.4 -9.8 -30.2 -35.7 8.0

May 13* -9.9 20.7 9.9 -5.0 34.4 -9.6 -26.0 -34.8 4.1

June 13* -9.9 13.5 11.2 -4.7 30.5 -5.7 -17.7 -32.3 7.2

Note: * = international prices (in USD rates); other prices are WPI


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I.6 Supply demand balance

On the back of a normal monsoon, kharif production of most crops is expected to pick upthis year relative to the harvest of 201213. On the basis of emerging scenario, we have

worked out the supply demand balances for the various crop commodities covered in thisreport. In most cases, data on stocks is limted and therefore, estimates are based on eitherthe government stocks, industry stocks (sugar) or assumptions based on past patterns ofproduction and trade.

At the global level,201314 ending stocks of wheat, rice and maize are forecast to increase,marginally in the case of rice and wheat but more significantly in the case of maize. Palm


10

At the global level,201314 endingstocks of wheat, rice

and maize areforecast to increase,marginally in thecase of rice and

wheat but moresignificantly in thecase of maize.

Table I.7: Projections of WPI Based on ARIMA models: % Change Year on Year

Commodity % Change YOY % Change MOM

June13 Jul13 Aug13 Sep13 June13 Jul13 Aug13 Sep13

Rice 19.1 17.6 16.6 15.0 2.6 1.6 1.2 0.8

Wheat 13.8 14.4 10.3 6.0 1.8 1.5 1.1 0.0

Jowar 4.7 8.1 4.3 2.1 -2.1 1.3 -1.1 -2.8

Bajra 26.5 17.9 12.1 7.8 0.4 -0.5 0.0 -3.8

Maize 16.6 17.4 14.1 9.0 3.5 1.8 0.7 -2.6

Gram -9.2 -17.0 -19.6 -19.5 -1.9 1.1 2.7 -0.2

Tur 14.2 7.9 0.0 0.4 0.0 1.1 0.5 1.0

Pulses 1.6 -6.8 -10.7 -12.6 -0.8 -0.7 1.7 -1.8

Groundnut Seed 5.5 7.4 4.7 1.9 -5.8 0.5 1.5 -1.2

Rapeseed/ Mustard Seed 4.9 3.9 -2.2 -6.5 1.7 3.3 2.5 0.7

Soyabean 11.1 -5.9 -12.0 -8.3 -7.2 -0.3 -1.5 -2.5

Edible oils 0.0 -0.2 -0.5 -1.3 -0.5 1.2 1.2 -0.5

Onion 114.0 66.2 52.6 64.0 23.9 -11.1 -1.4 7.4

Potato -14.2 -15.9 -20.6 -9.5 1.6 4.5 0.6 4.7

Food sector 8.6 7.4 7.5 7.5 2.1 0.5 0.7 0.9

Food_articles 9.7 9.9 11.3 10.9 3.0 1.6 1.0 0.3

Food_products 6.4 5.5 4.0 3.0 0.4 1.1 1.1 0.5

Note: The figures for June 2013 are actuals and the figures for JulySeptember are projected

Table I.8: Projections of Wholesale Prices in Delhi Based on Harmonic Analysis: % Change Year on Year

Month/ Year Jun13 Jul13 Aug13 Sep13

Wheat 22.2 23.9 4.8 4.7Rice 14.8 6.1 6.1 6.0Tur Dal 10.1 3.7 -8.9 -8.7Chana Dal -11.9 6.4 -24.8 -23.8Urad Dal 5.6 5.4 5.2 5.1Moong Dal 21.9 25.3 21.3 17.2Masur Dal 22.1 -9.7 -12.2 -14.3Potato -5.1 -10.5 -13.2 -16.2Onion 71.0 57.6 65.6 89.2Sugar 5.1 8.5 6.5 3.9Soy oil -4.9 -4.6 -3.9 -2.7Palm oil 0.1 -0.3 1.6 3.8Note: Projections are in bold.


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oil stocks are expected to rise creating downward pressure on vegetable oil prices.

In Part IV of the report, we discuss the short term scenario for specific food commodities.A summary of the scenario that is developing is the supply-demand balance sheet of thefood commodities which describes how the supply-demand balances are achieved withfluctuations in production. The overall supply-demand balances are summarised in TableI.9.


11

Table I.9: Food Balances (thousand tonnes): 201314 (000 tonnes)

Item Rice Wheat Maize Pulses Edible oils Sugar* Onion* Potato*

A.SupplysideBeginning stocks 24,000 24,200 550 1800 500 6500 750 1400

Production 107,000 90,000 22,500 18,200 9100 24000 16817 42479

Imports 0 0 5 3,800 10000 1500 7 0

Total supply 131,000 114,200 23,055 23,800 19,600 32,000 17,574 43,879

B.DemandsideDomestic consumption 98,000 90,200 18,395 21,800 17979 23000 15177 42243

Exports 8,000 5,000 4,000 200 0 2000 1640 236

Utilisation 106,000 95,200 22,395 22,000 17,979 25,000 16,817 42,479

C.Closingstocks 25,000 19,000 660 1,800 1,621 7,000 757 1,400Note: *= for marketing year 201213; in the case of pulses and edible oils small quantities of exports are made but we have ignored them in thissummary sheet. The year 201213 refers to the marketing year for each commodity.


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12


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PART II

Global Economic Context

13

There has been a modest global economic recovery from last years slowdown but severaleconomies particularly in the euro zone are still facing significant challenges and unlikelyto quickly resume normal growth rates. The Organisation for Economic Co-operationand Development (OECD) recently trimmed its world economic growth forecast for 2013to 3.1 percent from the November 2012 projection of 3.4 percent. Fiscal consolidation andhigh joblessness have continued to impede recovery in many countries. OECD forecastfor GDP growth in 2013 for euro zone is -0.6%. The International Monetary Fund (IMF)has cut its 2013 growth forecast for China to close to 7.8 percent in May 2013 from itsearlier estimate of 8 percent in April 2013 citing a sluggish global recovery. This is likelyto diminish potential for expansion of global food and feed consumption and trade.

II.1 Global Agricultural Outlook

Unfavourable weather events negatively impacted agricultural production in 2012 in someof the major producing and exporting regions. The US experienced its worst drought indecades, which resulted in a significant decline in maize production and a smaller declinein soybean production. A major dry spell also affected South Eastern Europe and Central

Asia during most of the growing season with wheat and coarse grain productionplummeting in these countries causing global prices rising sharply for most agriculturalcommodities. International prices of wheat, maize and soybeans surged in 2012 in thecontext of tight supply demand balances. .

High commodity prices last year are expected to stimulate crop planting this year in thenorthern hemisphere. The 201314 harvest, which, despite yield risks associated withdelayed plantings in the United States, should still lead to lower prices later this year as theanticipated rebound in crops around the world will help replenish supplies.

Global commodity outlook for 201314 is summarized below:

Wheat: Despite a tight US market, world output is set to recover in 201314, boostingexport competition. Loss of feed demand to maize will weaken prices. Nevertheless,stocks-to-use ratio is forecast to decline.

Rice: Rice production is forecast at a record level. Because of ample availabilities and /orrebuilding of inventories, rice prices are expected to be stable or trend downward. Global

rice market is affected by political decisions influencing rice exports, while weatherdevelopments in Asian countries could add volatility to rice production and price.

Maize: World maize production is forecast to increase by around 10 per cent. Feed andindustrial use of maize is expected to rise at a lower rate than production growth which

will boost ending stocks. However, with demand projected to remain quite robust and withinventories smaller than average, prices may not fall too far from current levels.

Soybeans: South American harvests have provided supply-side relief, but with YoY globalgrowth for 201314 expected to be smaller than in grains, the price outlook is generally

The Organisation forEconomic Co-operation andDevelopment (OECD)recently trimmed its

world economicgrowth forecast for2013 to 3.1 percent

from the November2012 projection of3.4 percent.

High commodityprices last year areexpected tostimulate cropplanting this year inthe northernhemisphere. The201314 harvest,

which, despite yieldrisks associated withdelayed plantings in

the United States,should still lead tolower prices laterthis year as theanticipated reboundin crops around the

world will helpreplenish supplies.


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bearish. Stocks to use ratio is likely to improve marginally.

Soybean oil: Although soybean oil underperformed relative to meal in the soy complex,greater biodiesel demand will support soy oil prices in 201314. Stocks to use ratio islikely to decline.

Palm oil: Forecast record palm oil production is expected to put further pressure on the

already weak palm oil prices. European debt crisis and Chinas slower pace of economicgrowth, with their impact on demand for vegetable oils, will remain the key to palm oilprice outlook. A marginal improvement in stocks to use ratio is forecast.

Sugar: Global sugar production in 201314 is estimated to be a record or near record.International raw sugar prices are at levels not seen in nearly three years with prices lessthan half the peak set in February 2011. Large supply overhang will weigh on prices. Lowprices are expected to stimulate global consumption and trade.

II.2 Early forecasts point to larger crop production

Initial global production and price forecasts for 201314 by major international and

national agencies point to a fairly comfortable situation for all major commodities such aswheat, rice, coarse grains, oilseeds, vegetable oils, and sugar provided weather remainsnormal through harvest (Table II.1). .

In the case of wheat although there is some expected shortfall in production in the UnitedStates due to unfavourable planting conditions, this is likely to be more than offset byhigher production in Russia, Ukraine, and Kazakhstan where production declined sharplyin 201213 due to unfavourable weather conditions. Production is also expected to besomewhat higher in the E U, Canada and Australia but lower in India, as compared to201213. The 201314 world wheat production forecast currently ranges from 682million tonnes by the International Grain Council (IGC) to 702 million tonnes by theFAO. USDA production forecast is at 696 million tonnes.

In the case of rice also initial forecast points to a comfortable level of output. At thispreliminary stage, virtually all producing countries in Asia are projected to harvest largercrops, with FAO forecasting both India and Indonesia heading to increases of more than3 million tonnes each. However, the monsoon holds the key to what will happen to riceproduction in 2013. Assuming normal weather, global rice production forecast rangesfrom 479.2 million tonnes by the USDA and 499.1 million tonnes by the FAO compared

with the 201213 USDA estimate of 470.2 million tonnes and FAO estimate of 489.9million tonnes.

201314 maize production is forecast to increase significantly from the drought reducedcrop in 201213 with forecasts ranging from 945 million tonnes by IGC to 963 milliontonnes by the USDA, an increase of about 10 per cent over 201213. Return to a morenormal yields in 2013, is expected to ease supply situation. Most of the increase in

production is expected in the U.S., Argentina, China and Ukraine.

Pulses production forecasts are available for only a few major exporting countries. Theforecasts point to increased production of dry peas in Canada and the United States and alower lentil production. In Australia, desi chick pea planted area is forecast to decline byabout 9 per cent and dun peas area by around 7 per cent, whereas lentil area is expected tobe unchanged from the 2012 level. Pulse production in Myanmar is expected to be moreor less unchanged from 2012 level with exports forecast at 1.5 million tonnes.


14

The 201314 worldwheat productionforecast currentlyranges from 682million tonnes by theInternational GrainCouncil (IGC) to 702million tonnes by theFAO. USDA

production forecastis at 696 milliontonnes.

Assuming normalweather, global riceproduction forecastranges from 479.2million tonnes by theUSDA and 499.1million tonnes by theFAO compared withthe 201213 USDAestimate of 470.2million tonnes and

FAO estimate of489.9 million tonnes.


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Buoyed largely by higher soybean production, total global oilseed production in 201314is forecast to scale a record high of 491 million tonnes, an increase of 4.9 per cent over201213.Prevailing competitive global prices are expected to boost 201314 soybeanproduction to a record high. According to USDA, a strong rebound for the U.S. crop isexpected to raise global soybean production in 201314 by 6 per cent to 285.3 millionmetric tonnes. The U.S. soybean crop for 201314 is projected to increase 12 per cent to a

record large 92.3 million tonnes, based on a recovery in the yield despite a likely marginaldecline in planted area. South American production of soybeans is also forecast to increasefrom the record 201213 levels.

Global production of rapeseed in 201314 is projected to increase 4 per cent to 63.1million tonnes due to improved crops for the EU-27, Canada, Ukraine, Russia, and India.Sunflower seed producers in Ukraine, Russia, the EU-27, and Argentina are expected toraise global production by 10 per cent to 40.3 million tonnes. For groundnut, globalproduction in 201314 is projected to decline 2 per cent to 36.4 million tonnes. Thereduction would be concentrated in the United States, where groundnut area and yields areexpected well below their 201213 record. Output for other major producing countries,including China and Argentina, would be moderately higher. Indias groundnutproduction is expected to remain more or less unchanged from the previous years level of5 million tonnes.

USDA projects global production of all vegetable oils in 201314 at a record 166.1 milliontonnes, an increase of 4 per cent over 201213. Most of the increase is in palm oil andsoybean oil. Global soybean oil production in 201314 is forecast at 44.6 million tonnes,a record, compared with 43.0 million tonnes in 201213, with most of the increaseconfined to South America and China. Projected palm oil production for 201314 is up5 per cent at 58.1 million tonnes with almost all of the increase arising from Indonesia,

which is expected to rise to 31 million tonnes from 28.5 million in 201213. In contrast,no gains are anticipated for Malaysian palm oil production in 201314 forecast at 19million tonnes.

Despite an anticipated significant decline in sugar production in India, global sugarproduction is expected to reach a record 175 million tonnes. Most of the increase isexpected in Brazil, the worlds biggest sugar producer, where production is likely to climbto a record of over 40 million tonnes. Production is expected to be higher in Thailand, thesecond largest sugar exporter. Output is set to fall in Russia,Ukraine, the U.S.and Mexico.

A steep decline in New Zealands milk production in recent months, following anabnormally prolonged dry period at the start of the year, and stagnant or decliningproduction in other major exporting countries such as the Australia and the U.S. led tosharp increase in global prices of dairy products in recent months. Nevertheless, NewZealands overall output for the 201213 (JuneMay) production year is projected to finishat record levels. In Europe, warmer weather during April has allowed cumulative milkproduction to return to the seasonal average in some countries. According to some

sources, milk output from worlds 15 largest dairy exporters is projected to increase by 0.5per cent in 2013, less than a third of the growth seen in 2012.

GLOBAL ECONOMIC CONTEXT

15

USDA projects globalproduction of all

vegetable oils in201314 at a record166.1 million tonnes,an increase of 4 percent over 201213.Most of the increase

is in palm oil andsoybean oil.

Despite an

anticipatedsignificant decline insugar production inIndia, global sugarproduction isexpected to reach arecord 175 milliontonnes.


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II.3 Prices

After weakening or remaining stagnant during January to April, 2013, world wheat, maize,and soybean prices strengthened in May due to late season supply squeeze (Figure 2).However, rice, soybean oil, and palm oil prices weakened in recent months reflecting largerstocks. Sugar prices also witnessed a downward trend reflecting large carryover stocks andprospects of another bumper crop. A notable exception was dairy products whose pricesrose sharply since the beginning of the year, peaking in April, causing the overall FAOglobal food price index to rise in March and April. However, prices declined in May.

According to FAO, the leap in global prices of dairy products is partly a reflection of theabsence of commercial stocks to cater for such an unexpected reduction in availability,rather than a more profound shortage of supplies.


16

Table II.1: Global Production Forecasts for Major Food Commodities (Million Tonnes)

FAO USDA ABARES IGC Change from

previous year*

Wheat201112 701.5 697.2 696.0 696.0

201213 659.1 655.6 656.0 655.0 -

201314 702.0 695.9 688.0 682.0 +Rice201112 485.3 465.8 463.0 466.0

201213 489.9 470.2 465.0 470.0 -

201314 499.1 479.2 472.0 NA +

Maize201112 884.3 883.3 884.0 876.0

201213 856.1 855.7 849.0 856.0 -

201314 960.0 962.6 944.0 945.0 +

Allcoarsegrains201112 1167.5 1154.6 1156.0 1155.0

201213 1160.7 1126.9 1125.0 1131.0

201314 1266.0 1250.0 1223.0 1234.0 +

Totaloilseeds201112 452.3 442.1 438.0 NA

201213 474.3 467.9 462.0 NA +

201314 NA 490.8 478.0 NA +

Totalvegoils201112 181.2 157.0 152.0 NA

201213 186.7 159.9 155.0 NA +

201314 NA 166.1 161.0 NA +

Sugar(Rawequivalent)201112 173.5 161.9 175.1 NA

201213 177.3 172.0 179.2 NA +

201314 NA 174.9 181.9 NA +

Milk201112 737.9 529.8 NA NA

201213 759.6 544.8 NA NA +

201314 NA 556.1 NA NA +

Note: The change over previous year turns out to be uniform across forecasts in all commodities where more than one forecast is available. -represents a decline and +represents an increase.


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II.4 Price outlook bearish

An expected production rebound in most commodities in 201314 is likely to cause aweakening in prices in coming months unless growing season weather conditions turnhostile.

Wheat market is expected to ease moderately in 201314 and prices will dip from lastyears record levels but still at a historically high level reflecting lower maize prices leadingto reduced demand for wheat as livestock feed. However, despite rising production,increased feed consumption and low opening stocks will result in prices of coarse grains

also remaining above the five-year averages to 201112.

The prospect of an improved US harvest, continued export availability from SouthAmerica, and a softer pace of purchases by China are likely to keep soybean prices bearish.A glut of palm oil in Southeast Asia is contributing to soybean oil price weakness. In theU.S. domestic demand for soybean oil has been sluggish as use for biodiesel in the firstquarter of 201213 was about half its year-earlier level.

Industry sources are mostly bearish on crude palm oil prices for 2013, citing growingstockpiles and recovery in production of competing vegetable oils. Slowing Chineseeconomic growth and a decline in global biodiesel demand are also factors contributing to

weakening palm oil prices.

Global prices of dry peas, lentils, and chick peas are expected to fall in 201314 due tolarger supplies and carryover stocks in major exporting countries such as Canada.

Sugar prices are expected to weaken as the world continues to accumulate stocks. Themood in the market is reported to be quite downbeat and there is a number of forecastsaround in the market that the price will drop further in coming months just because of thesurplus.

Dairy product prices, after peaking in April, declined in May and are likely to furtherweaken in coming months.


17

Wheat market isexpected to easemoderately in201314 and prices

will dip from lastyears record levelsbut still at a

historically highlevel reflectinglower maize pricesleading to reduceddemand for wheat aslivestock feed.

Global prices of drypeas, lentils, andchick peas are

expected to fall in201314 due tolarger supplies andcarryover stocks inmajor exportingcountries such asCanada.

Figure II.1: Global Price Trends of Major Food Commodities

Source: FAO


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18

Dairy product prices,after peaking inApril, declined inMay and are likely to

further weaken incoming months.

CBOT future price quotes (Table II.2) support the price outlook scenario for variouscommodities discussed above. The early June CBOT price quotes show a further

weakening of prices for most commodities in coming months with the arrival of the newcrop, reflecting improved crop prospects in 201314. In the case of soybeans, however,future price quotes have tended to strengthen despite an expected record production butthe direction of change for the forthcoming months is of declining prices.

Table II.2: CBOT Futures Price Quotes US$/MT

Commodity/ $ per Metric Tonne

date of Quote

SoybeanCBOT Nov12 Jan13 Mar13 May13 Jul13 Aug13 Sep13 Nov13 Jan1402Nov12 561.08 560.98 552.53 540.59 534.25 521.48 504.67

07Dec12 540.96 540.87 533.98 529.66 519.56 503.76

04Jan13 510.37 502.38 499.16 497.88 491.26 479.32 462.22 471.79

01Feb13 541.69 538.48 534.71 523.97 505.04 489.61 491.17

01Mar13 538.11 530.40 524.42 510.00 483.91 463.43 464.72

05Apr13 500.36 493.74 484.01 464.81 451.21 453.42

03May13 534.62 509.73 490.62 465.08 448.73 451.49

07Jun13 561.17 532.69 497.97 479.78 481.62

WheatCBOT Mar13 May13 Jul13 Sep13 Dec13 Mar14 May14 Jul14 Sep1402Nov12 322.79 325.37 321.51 324.45 326.93

07Dec12 316.36 319.76 321.05 324.26 327.48

04Jan13 274.57 278.06 280.45 284.67 289.36 293.31

01Feb13 281.09 284.12 285.96 290.00 295.42 299.92

01Mar13 262.07 264.74 265.38 268.14 272.82 277.41

05Apr13 256.84 258.77 261.71 266.39 271.26 274.20

03May13 261.34 264.92 268.41 273.83 278.70 279.99

07Jun13 256.38 259.23 264.74 270.25 273.56 275.49

MaizeCBOT Mar13 May13 Jul13 Sep13 Dec13 Mar14 May14 Jul14 Sep1402Nov12 292.31 291.13 287.68 258.84 250.58 253.23 255.40

07Dec12 290.24 291.03 289.55 258.94 251.07 254.22 256.58

04Jan13 267.80 268.00 265.63 234.04 225.09 229.12 231.98 233.35 225.97

01Feb13 289.75 290.44 286.89 242.60 233.06 237.19 239.95 241.42 232.6601Mar13 285.12 278.92 270.46 230.01 219.18 223.22 225.97 227.84 216.33

05Apr13 247.62 243.20 217.31 210.62 214.95 218.10 220.56 211.21

03May13 275.38 260.32 228.04 217.90 221.84 224.89 227.55 220.26

07Jun13 261.11 227.55 215.83 219.97 222.82 225.48 220.66

SoyaOilCBOT Jan13 Mar13 May13 Jul13 Aug13 Sep13 Oct13 Dec13 Jan1402Nov12 1094.58 1104.73 1114.87 1123.68 1125.23

07Dec12 1127.21 1138.01 1148.16 1156.53 1154.99

04Jan13 1089.51 1100.10 1109.58 1117.51 1116.85 1115.31 1109.35 1105.61 1110.68

01Feb13 1168.22 1177.48 1183.87 1183.21 1176.37 1164.03 1163.15 1166.89

01Mar13 1090.62 1095.02 1100.98 1100.98 1097.89 1089.29 1085.55 1090.17

05Apr13 1076.51 1082.68 1083.34 1082.02 1076.51 1073.20 1074.30

03May13 1083.78 1086.21 1080.47 1075.18 1067.47 1062.18 1061.96

07Jun13 1061.74 1062.18 1057.99 1050.27 1045.20 1043.44SugarLCE May13 Aug13 Oct13 Dec13 Mar14 May1402Nov12 526.90 527.50 528.20

07Dec12 522.20 525.60 530.10 537.90

04Jan13 515.60 519.10 522.40 531.00

01Feb13 511.60 515.70 519.10 527.20

01Mar13 513.90 502.50 497.60 504.20 514.20

05Apr13 504.50 489.90 490.20 499.40 507.70

03May13 496.80 494.00 500.50 506.70 510.70

07Jun13 482.50 469.80 474.30 480.10 484.60

Source: Moore Research Centre, Inc. (www.mrci.com/ohlc/index.php)


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II.5 Consumption

Most international agencies estimate wheat consumption in 201314 to rise marginally,with forecasts ranging from 680 million tonnes by IGC to 694 million tonnes by USDA.Despite low maize prices, feed use of wheat is expected to remain high in countries thathave a tradition of wheat feeding, such as the EU, Russia, and black sea region, where

production is expected to be much higher this year.

Increased competition among exporters and sharply lower prices in 201314 is expected toencourage coarse grain use around the globe, with total use projected up 7 per cent to1,220.0 million tons by USDA. Corn ethanol use in the U.S. is forecast to increase by 5.4per cent. Several factors are likely to hamper further growth in corn use for ethanol,including the overall decline in U.S. gasoline consumption and weak export prospectsbecause of increased competition from Brazil. According to the International Energy

Agency (IEA), although there is no clear indication whether the Renewable FuelsStandard (RFS2) in the U.S. will be amended, there is growing market perception of policyuncertainty which has introduced an additional downside risk to ethanol production in themedium-term forecast.

According to USDA, global rice use for 201314 is projected at a record 474.0 milliontons, up 1.5 per cent from a year earlier. Bangladesh, Cambodia, China, India, Indonesia,Nigeria, and Vietnam account for most of the projected increase in global consumption in201314. In contrast, consumption is projected to decline in 201314 in Japan, SouthKorea, and the United States.

World oilseeds consumption is forecast to increase in 201314 driven by a rise in oilseedscrush, reflecting increased demand for vegetable oils and protein meals. USDA expects the

worldwide crush of soybeans to climb 4.3 per cent in 201314 to 239.0 million tonnes andtotal oilseed crush to increase by 3.4 per cent to 408.0 million tonnes.

Correspondingly world vegetable oil consumption is also forecast to rise by 3 per cent to arecord 162.0 million tonnes, reflecting consumption growth in developing countries,

particularly China and India, and industrial demand. Indonesia, the worlds biggest palmoil producer, is mulling a move to produce biofuel to manage abundant local supplies

which contributed to falling international prices. The historically large price discounts forpalm oil compared to soybean oil and other oils could quickly raise its use in the EU edibleoil market.

With global sugar prices expected to remain weak in 2013, sugar is expected to attractmarket share from alternative sweeteners this year and also encourage increasedconsumption in developing markets, which should lead to a general rise in consumption.

II.6 Trade

A record wheat production and ample exportable supplies in the EU, Kazakhstan, Russia,and Ukraine are partially offset by a smaller U.S. wheat crop. As a result, a small drop in

world trade is forecast both by USDA and IGC to 143.3 million tonnes and 137 milliontonnes respectively. The increase in exports will be from Russia and Ukraine which willbe offset by lower exports from other major exporting countries such as the U.S., Canada,

Australia and EU. The impact of detection of genetically modified rogue wheat straingrowing in a farmers field in Oregon in the U.S. on global wheat trade is expected to beminimal. This incident resulted in Japan suspending imports of western white wheat andfeed wheat from the U.S. and South Korea imposing increased import inspection.


19

Increasedcompetition amongexporters andsharply lower pricesin 201314 isexpected toencourage coarsegrain use around theglobe, with total useprojected up 7 percent to 1,220.0

million tons byUSDA.

World vegetable oilconsumption is alsoforecast to rise by 3

per cent to a record162.0 million tonnes,reflectingconsumption growthin developingcountries,particularly Chinaand India, andindustrial demand.


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Global rice trade is forecast to remain nearly unchanged at 38 million tonnes or declinemarginally in 201314 as several traditional importers focus efforts on boostingproduction. Exports from Thailand are forecast to increase marginally as the governmentcontinues to release stocks. Exports from India are forecast to decline due to highdomestic price vis-a-vis competing exporters such as Vietnam and Pakistan. Sub-Saharan

Africa is projected to remain the largest rice-importing region followed by the Middle

East. In Southeast Asia, imports are projected to decline by around 5-per cent, withPhilippines likely to account for most of the decline.

Higher coarse grain exports are forecast coming principally from Black Sea countries asthe United States gains--and South America loses--about 15 million tons of trade. Mostof the increase is in maize forecast at around 102 million tonnes. China leads the growthin imports, primarily as lower world prices increase corn trade. The drought in the US last

year has allowed new export opportunities to surface for countries around the world thathave expanded production because of high values.

World trade in oilseeds and vegetable oils is forecast to rise in 201314, reflectingincreased production of all three major oilseeds. Lower prices will greatly benefit the

worlds importers. Global soybean exports are forecast at a record 107.0 million tonnes, up

10.0 million driven by large exportable supplies and strong foreign demand led by China.Soybean imports for China in 201314 are projected up to 69 million tonnes from arevised 201213 forecast of 59 million tonnes.

Global soybean oil trade is forecast to grow slightly due to rising demand in China andIndia. Global palm oil trade is also expected to expand on abundant supplies andcompetitive prices. While Indonesias exports are forecast at 21.0 million tonnes, up900,000 tonnes, Malaysias exports are likely to remain more or less unchanged at 17.2million tonnes.

Global pulse trade in 201314 is likely to remain more or less unchanged from the201213 level. An increase in dry pea trade will be largely offset by decline in chickpeastrade from Canada and Australia. Exports from Myanmar is forecast to remain more or

less at the same level as in 201213 at around 1.5 million tonnes, which included mostlyurad, tur, and mung.

Low prices are expected to stimulate global sugar consumption and trade, with the USDAexports forecast up 4 per cent at 59 million tonnes. Brazil and Thailand will dominateexport expansion.

Supplies of milk products for trade are still constrained by weather related factors affectingmilk production in most of the major exporting countries.

II.7 Stocks

201314 global ending stocks of wheat are forecast to increase marginally, with the USDA

forecast at 181 million tonnes, and IGC forecast at 180 million tonnes. Stocks in theUnited States are expected to drop, whereas most other exporter stocks (except India) areexpected to grow. A marginal decline in global stocks-to-use ratio is forecast.

USDA is forecasting a marginal increase in rice stocks by the end of 201314 marketingyear at around 109 million tonnes, the highest ever. Most of the stocks increase is in Indiaand Thailand but is forecast to remain unchanged in China. Stocks-to-use ratio is placedat 22.8 per cent, a marginal increase over the previous year.


20

Global pulse trade in201314 is likely toremain more or lessunchanged from the201213 level.

Low prices areexpected tostimulate globalsugar consumptionand trade,


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Maize stocks are projected to increase by the end of 201314 marketing year to around152 million tonnes from the previous years 124 million tonnes. Stocks-to use ratio is alsoexpected to improve

While soybean oil stocks-to-use ratio is projected to decline, there is a significantimprovement in the stocks to use ratio of palm oil.

Sugar ending stocks and stocks-to-use ratio in 201213 are projected to improve to one ofthe highest levels in recent years.

II.8 Implications for India

Agricultural trade outlook for India presents a mixed picture. Lower global price outlookfor Indias major export items such as rice, wheat, maize, and soybean meal is bearish andIndian exports of these commodities will face increased competition from other exportingcountries in coming months. This is further accentuated by the increasing cost ofproduction for most agricultural commodities in India necessitating higher governmentsupport prices leading to higher market prices. A redeeming factor in recent months hasbeen a sharp weakening of India rupees against US dollar making it possible for Indianexporters to offer competitive prices to international buyers.

Setting high export price for wheat by the government could discourage exports in thecontext of declining global prices. Furthermore, a significant decline in wheatprocurement this year could make the government more cautious about export allocation,especially in the context of implementing the National Food Security Ordinance, which

entails statutory provision of highly subsidized food grains to a major proportion of Indianpopulation. Nevertheless, there could be some comparative advantage for India in exportsof wheat to neighbouring countries such as Bangladesh, which was a major importer ofIndian wheat 201213, due to lower transportation costs.

Indian rice exports in 201314 are likely to be tempered by reduced domestic exportablesurplus and higher domestic requirement with the passing of the National Food SecurityOrdinance. The burgeoning rice stocks in Thailand also increase the potential fordecreased exports as Thailand could release supplies from its stocks and promote exports


21

Lower global priceoutlook for Indiasmajor export itemssuch as rice, wheat,

maize, and soybeanmeal is bearish andIndian exports ofthese commodities

will face increasedcompetition fromother exportingcountries in comingmonths.

Setting high exportprice for wheat bythe governmentcould discourage

exports in thecontext of decliningglobal prices.

Figure II.2: Stocks-to-Use Ratio of Major Ag Commodities


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to regain its share of rice trade. Indian rice export price quotes have increased in recentmonths vis-a-vis other major exporting countries such as Vietnam and Pakistan, slowingexports. Efforts to achieve self sufficiency by major importing countries also couldnegatively impact global rice trade in general and Indian rice exports in particular. Theonly saving factor has been the continuing weakening Indian rupee against US dollar.Indian exports of maize also face the same dilemma of weakening global prices and

increasing domestic cost of production.

On the import side, vegetable oil, Indias major agricultural import item, should benefitfrom declining global prices, which however could be offset to some extent by the

weakening rupee, making imports costlier in rupee terms. Imports of pulse also willbecome costlier due to the depreciation of rupee against dollar.

Indias competitiveness in the international sugar market will continue to be under pressureby lower production, high domestic prices and increasing sugarcane prices in the contextof rising global production and record stocks resulting in declining international prices.


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Box II.1: International Ag Policy Developments

Likely to Impact India

Cheap Black Sea wheat to get pricier as storage improvesThe Black Sea region may no longer be a source of deeply discounted wheat onworld markets this autumn as improving storage and financing conditions meanfarmers will have less need to sell urgently. In the past, farmers in Russia andUkraine sold quickly and aggressively, as storage capacity constraints and limitedaccess to credit forced them to market immediately after harvest. Major investmentin grain infrastructure and storage in recent years in the region has convinced banksto participate more in financing the trade. While Russia and Ukraine are expectedto store some grain, analysts said they would remain one of the worlds cheapsuppliers, typically attracting interest from price-sensitive buyers in North Africaand the Middle East. (Source: FAO based on Agrigate Media)

Cambridge-based scientists develop super wheat

British scientists say they have developed a new type of wheat which could increaseproductivity by 30%.The Cambridge-based National Institute of AgriculturalBotany has combined an ancient ancestor of wheat with a modern variety toproduce a new strain.

In early trials, the resulting crop seemed bigger and stronger than the currentmodern wheat varieties. It will take at least five years of tests and regulatoryapproval before it is harvested by farmers. Some farmers, however, are urging newinitiatives between the food industry, scientists and government. (Source FAObased on BBC)

Egypt seeks end to foreign wheat dependenceEgypt is stepping up its wheat production in a bid to stem the country s dependenceon foreign imports, Industry and Trade Minister Hatem Saleh said. Wheatproduction is expected to reach 10 million metric tons this year, and within two tothree years Egypt will achieve self-sufficiency, according to the Minister. Egypt,the worlds largest wheat importer, has cut wheat imports for its subsidized breadprogram by 35 percent to 3.4 million tons in the 12 months ending in June as thegovernment struggles to raise funds, the U.S. Department of Agricultures Foreign

Agricultural Service estimates. (Source: FAO based on Business Week)

Saudi Arabia to

Documents

Agiculture Report Apr June 2013