Higher domestic prices drag farm produce exports

After scaling a new high last fiscal, agri-exports could face a threat of slowdown as several commodities such as corn, wheat, soyameal and sugar among others have been out priced in the world markets. The overseas shipments of these commodities have slowed down in recent months with buyers seen shifting to other origins even as global prices remain bearish on ample supplies.

Trade sources said that shipments of many a commodity is unviable in the current scenario as domestic prices are ruling higher than global price. Also the fact that rupee has been ruling steady against the dollar in recent past is not giving any competitive edge for the exporters. Agri-exports had touched a whopping ₹2.68 lakh crore in 2013-14.

“Except for rice, there’s no viability for exports of other cereals,” said Tejinder Narang, grains trade analyst. While India may continue to maintain its dominance in rice exports with shipments likely to be around 10.5 million tonnes, there is a sharp decline in wheat exports despite huge stocks in the country, Narang added.

Against an export of 5.5 million tonnes in 2013-14, India has exported about 1.7 million tonnes of wheat in the current fiscal. Bulk of the wheat exports have been carried out by the private trade, while shipments from the Government stocks have stopped. The Government is yet to take a call on allowing wheat shipments. Wheat stocks in Central pool stood at 381 lakh tonnes as on August 1, almost twice the strategic and buffer norm of 201 lakh tonnes.

The USDA has forecast Indian rice shipments in 2014-15 to be around 8.5 mt lower than last year’s 10.5 mt. Also, the forecast for wheat and corn is lower at 3 mt and 2.5 mt respectively.

However, the Indian rice exporters are bullish on prospects despite short term challenges.

“The support provided by Thailand Government to boost its rice shipments, is proving to be a challenge for the Indian exporters. However, we expect a good growth in shipments this year – a repeat of 2012, when shipments peaked to over 10 mt,” said BV Krishna Rao, Managing Director of Pattabhi Agro Foods Ltd, a large rice exporter from Andhra Pradesh.

“Our parboiled rice with 5 per cent brokens is still competitive, while the white rice is not competitive,” Rao added.

Similarly, basmati exports are set to pick up in coming months. “Buyers traditionally slowdown their purchases on expectations of new crop, but we expect a demand pick up from next month,” said Vijay Setia, executive director at Chamanlal Setia Exports Ltd. Setia, a former head of the rice exporters body predicts that basmati exports would grow at around 20 per cent over next 2-3 years.

In case of soyameal, the exports have taken a hit not only due to price disparity, but also due to lower availability for shipments. “There is hardly any shipment happening now, but deals for the new crop are taking place at around $470-480 a tonne,” said Rajesh Agarwal, spokesperson for Soyabean Processors Association of India. Even the shipments of skimmed milk powder (SMP) are not viable these days as the global prices have dropped on improved supplies. “The global prices are hovering at around ₹200 a kg, while the domestic prices are around ₹230 a kg,” said Sandeep Aggarwal, Director, SMC Foods, a Delhi-based exporter.