In recent years, one found the government’s estimates of major crops — both kharif and rabi — suspect. Trade and industry players seldom went by official numbers in their business plans. More often than not, crop production was overestimated, be it rice, wheat, coarse grains, pulses or oilseeds, and few questioned the veracity of official data.
New Delhi was compelled to make several policy interventions in the last two years despite official estimates suggesting record production of various crops. In many cases, exports were banned (wheat, rice) or suspended (sugar), stock limits were imposed (pulses, wheat) and then reduced. Derivatives trade in a number of commodities has remained suspended for close to two years now, denying the value chain participants a scientific tool for risk management.
Yet, food prices continue to be at elevated levels. Our agricultural trade has been on a roller-coaster ride because of knee-jerk policy interventions by the government based on inaccurate, often exaggerated, data. The processing industry has been the victim of such interventions. The wheat milling industry is a good example.
It is unclear if the release of inaccurate crop production data was by accident or by design; but such data have now come to bite all stakeholders — supplies have tightened; shortages have become apparent; open market prices have risen. All these have forced the government into firefighting.
Even the Finance Minister recently lamented about inaccurate yield and output data while stressing the urgent need for reliable farm output estimates.
It has to be recognised that policy decisions based on farm data whose credibility is suspect are bound to falter and not deliver the desired outcomes. It appears that various ministries associated with agricultural trade policy decisions — Agriculture, Commerce, Food, Consumer Affairs and Finance — work in silos and are not unduly bothered about verifying the correctness of data as well as claimed outcome of interventions. They may be keen to ‘tide over’ a particular problem hoping time will solve it.
Review of data
Thankfully, realisation appears to have finally dawned on the government that its numbers need review and on a real-time basis. A new portal called Unified Portal for Agricultural Statistics (UPAg) has been launched for farm data management with the aim to make agricultural policy framework more efficient and responsive.
Some of the key features of UPAg include standardised data relating to area, yield, production and trade; data analysis using advanced analytics, offering insights such as production trends, trade correlations, and consumption patterns, aiding policymakers in making informed decisions; and granular production estimates with increased frequency, enhancing the government’s ability to respond to agricultural crises swiftly.
While the intention to provide credible data is clear, it remains to be seen how well the portal performs and be of practical use to stakeholders. The process of data collection in a vast and diverse country such as ours is daunting.
While advanced analytical tools including the application of artificial intelligence is likely to improve analytical efficiency, it is necessary to realise that markets are a very different animal. Markets may not necessarily behave as predicted by any machine. Markets do not behave with mathematical precision.
For example, a one per cent change in supply or demand will not result in a one per cent change in price. The price change may be multiple times, depending on market conditions and the perception of market participants.
More important, commodity markets are not static. Volatility is in the very nature of commodity markets as they are subject to multiple drivers each operating with varying intensity. Commodity markets behave today based not on today’s supply-demand fundamentals, but based on expected changes in the supply-demand fundamentals at a future point in time. In a manner of speaking today’s price may be indicative of tomorrow’s market condition.
So, interpretation of data is critical as is drawing conclusions. Crop forecasting is a combination of art, science and experience.
Stakeholders in the country’s agricultural markets look forward to the early operationalisation of the UPAg portal. Hope it brings about greater credibility to official data and ensures timely dissemination that may exert a transformational effect on agribusiness.
The writer is a policy commentator and agribusiness specialist. Views are personal