FAO & Global Prices + Wheat Import + Sugar & Ethanol + Climate Change & Monsoon

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NEWS Bulletin from Indian Society For Sustainable Agriculture And Rural Development ********************************* FAO & Global Prices + WHEAT IMPORT --- 1. FAO predicts decline in global wheat prices - Cautions much will depend on favourable planting conditions in Australia in the 2007 season 2. No wheat shortage but import for buffer 3. Pulse imports at a slow pace SUGAR & ETHANOL---- 4. Sugar industry seeks higher price for ethanol from oil cos 5. Confectioners want excise exemption 6. KPMG suggests regulator to prop up ailing sugar industry GLOBAL CLIMATE CHANGE & INDIAN

MONSOON----- 7. Monsoon hits cultivation hard ---- FAO predicts decline in global wheat prices Cautions much will depend on favourable planting conditions in Australia in the 2007 season http://www.financialexpress.com/fe_full_story.php?content_id=169976 ASHOK B SHARMA Posted online: Saturday, July 14, 2007 at 0000 hours IST NEW DELHI, JUL 13: Contrary to the assessment made by India, the UN Food and Agriculture Organisation (FAO) has said global wheat prices are expected to decline in the coming months, with generally improved supply

prospects and spill-over impact of recent reduction in maize prices. On July 10, India finalised contracts with three select bidders for import of 511,000 tonne wheat at $322-300 a tonne, apprehending further rise in global prices. The government had, in May, scrapped the bids quoting $263 a tonne as it found the price too high. According to FAO, wheat prices in 2006-07 had risen due to declines in production in major exporting countries, export restrictions imposed in several countries and also due to the impact of surging maize markets. The situation is reverse in the coming months. FAO, while making a forecast of falling global wheat prices in the coming months has, however, cautioned that much would depend upon favourable planting conditions in Australia in the 2007 season. Wheat cultivation is in progress in the southern hemisphere. FAO said

India may have to import only 2 million tonne in 2007, while the government said it needed to import 5 million tonne.In the recent issue of Crop Prospects and Food Situation, FAO has said global wheat output in 2007 is likely be around 621 million tonne, marking an increase of 4% over the previous year’s level. Grain of truth • FAO says wheat prices in 2006-07 had risen due to decline in production in major exporting countries, and the impact of surging maize markets• FAO said India may have to import only 2 million tonne in 2007• FAO has said global wheat output in 2007 is likely be around 621 million tonne, marking an increase of 4% over the previous year The estimated global wheat output in 2007 would be “well above the average of the past five years,” despite damage to the crop in US due to harsh winter and decline in production in Canada. Wheat output has good

prospects in Europe and Asia, with production in 2007 likely to be close to the level of the previous year. Decline in China’s wheat output is likely to be offset by increased production in India and Pakistan. FAO has said that world trade in wheat in 2007-08 is likely to decline by 3.5 million tonne to be at 106 million tonne as many countries would not feel the need to import wheat. “This is a welcome development,” it said. However, India’s decision to import wheat at high prices is based on the Unites States Department of Agriculture’s assessment of downgrading global wheat output to 610 million tonne and indicating future rise in prices. The official press release, while admitting this, has also citied bullish trend in the Chicago Board of Trade futures.----------------- No wheat shortage but import for

buffer http://www.financialexpress.com/fe_full_story.php?content_id=170230 ASHOK B SHARMAPosted online: Tuesday, July 17, 2007 at 0000 hours IST NEW DELHI, JUL 16: The government defended its recent purchase of 511,000 tonne wheat from the overseas market at high prices and said it would import more wheat on regular basis. A total of 5 million tonne wheat would be imported in the current year. Speaking to mediapersons at the sidelines of the foundation day celebration of the Indian Council of Agricultural Research (ICAR) Society in New Delhi on Monday, the Union agriculture minister Sharad Pawar said, “Though there is no shortage of wheat in the country, we would

need to import for building up our buffer stock.” The minister said the government agencies had already purchased 11.1 million tonne wheat from farmers against the minimum support price (MSP) of Rs 8,500 a tonne in the current season and “the level is satisfactory.” He said there was no further proposal for hiking the MSP as demanded by farmers for purchase of more wheat by government agencies. “If the farmers think that they can get a better price, they are free to sell to private companies and traders,” he said. Farmers had alleged that government was importing wheat at higher prices (landed cost at Rs 14,850 a tonne) while paying them only Rs 8,500 a tonne for their wheat. When asked as to whether the government would explore the option of floating tender for purchase of wheat in the domestic market, Pawar said : “This would put pressure on the domestic market

and would cause rise in prices. We do not want such a situation to happen and therefore found imports as the way.” Questioned as to why the government cancelled the earlier offer made by bidders to supply at $ 263 a tonne in May and opted for bids quoted at higher rates in July ($318-$329 a tonne), the minister said : “In May the bidders offered to supply 0nly 306,000 tonne at $ 263 a tonne. We thought that global prices would decline and therefore cancelled the bids. Now that global prices are seen appreciating and USDA has said it would appreciate further. We, therefore opted to purchase at the current global prices-------- Pulse imports at a slow pace http://www.financialexpress.com/fe_full_story.php?content_id=170154 ASHOK B SHARMA Posted online: Monday, July 16, 2007 at 0042 hours IST NEW DELHI, JUL 15: Not only the import of wheat, but also that of pulses is not an easy going affair for the government. Less than one-fifth of the one million tonne pulses contracted for imports by four agencies designated by the government could arrive at the Indian ports by the first week of July. Four agencies namely, PEC Ltd, MMTC Ltd, National Agricultural Marketing Cooperatives Federation of India (Nafed) and the State Trading Corporation of India (STC) contracted import of 1,037,500 pulses, out of which only 187,371 tonne pulses arrived at Indian ports. Different kinds of pulses like urad (black gram), moong (green gram), tur (pigeon pea), yellow peas, chick peas, masoor (red lentils) and dunpeas were contracted for

imports. Pulses production in 2006-07 had increased to 14.10 million tonne from 13.39 million tonne in the previous year, but was not sufficient to meet the consumption demand in the country. The government had fixed a target of 15.15 million tonne pulses production in 2006-07. Pulses form a principal item in the Indian meals, apart from its extensive use in munchies. With a view to meet the consumption demand, the government decided to facilitate import of pulses by reducing the effective duty to zero. According to the Agmarketnet data, even though market arrivals of Bengal gram increased by 83% its average wholesale prices shot up by 4% in June this year as compared to that in the same month last year. Comparatively the average wholesale prices of red gram increased by one per cent in June 2007, while its market arrivals declined by 14%.

Notwithstanding the increase in market arrivals of tur (pigeon pea) by 30%, its average wholesale prices shot up by 10% in June 2007 as compared to that in the same month last year. India’s attempt to import wheat for replenishing its buffer stock is now facing the problem of rising global prices, though the world’s wheat production in 2007 increased by 4%. Experts say that in case of pulses the situation is more difficult as very few countries grow enough pulses to cater to India’s needs. “Though India is major producer of pulses, the production is not sufficient to meet our needs. We are an importer of pulses every year. We therefore need to achieve a breakthrough in production and productivity of pulses,” said Vijay Sardana executive director of Centre for International Trade in Agriculture and Agro-based Industries

(CITA).----------------- Sugar industry seeks higher price for ethanol from oil cos http://www.financialexpress.com/fe_full_story.php?content_id=170146 ASHOK B SHARMA Posted online: Monday, July 16, 2007 at 0030 hours IST NEW DELHI, JUL 15: The sugar industry has urged oil companies to increase the purchase price for ethanol to at least Rs 23 a litre from the existing price of Rs 21.50 a litre, when 10% mandatory doping of auto-fuel comes into force. The industry has also suggested that no levy other than the central sales tax should be imposed on ethanol. This can be possible only if

ethanol is included in the list of goods of special importance under chapter IV of the Central Sales Tax Act. Therefore the state governments will not have authority to impose levy. The sugar industry said that one of the major hindrances to the implementation of ethanol doped petrol programme was that the states were imposing levy on ethanol at varying rates. The Union government had earlier announced mandatory use of 5% ethanol doped petrol as auto-fuel, but it has yet to be implemented fully in some states. The government has plans to raise the ethanol doping to 10% in the latter half of 2007. In this context, the Indian Sugar Mills Association (ISMA) in a representation to the Union petroleum ministry and the Planning Commission said that the sugar industry have produced 565 million litre ethanol in 2007-06, sufficient enough to meet the needs of 5% doping programme. But if doping was to be

hiked to 10%, the price structure needs to be reconsidered. Isma estimated that for meeting the needs of 10% mandatory doping of petrol, an additional 5% ethanol has to be produced from B-heavy molasses. Fueling Talks • Purchase price to be increased to Rs 23/litre• No levy on ethanol other than central sales tax B-heavy molasses are rich in recoverable and an additional 5% ethanol production would amount to a loss of one million tonne in sugar output. This will not be grave given the potentiality of the industry to produce sufficient sugar. But the oil companies should bear in mind the loss incurred by the industry in not producing one million sugar and diverting molasses for ethanol production. Thus on basis of average realization from sugar sales at Rs 1300 per quintal, the price of ethanol purchase should be increased to Rs 23 a litre.------------ Confectioners want excise exemption http://www.financialexpress.com/fe_full_story.php?content_id=169994 ASHOK B SHARMA Posted online: Saturday, July 14, 2007 at 0017 hours IST NEW DELHI, JUL 13 : The Rs 3,500-crore confectionary industry has called for exemption of excise duty which will enable them to cater nutritious food to the poor at cheaper rates. Industry leaders have said growth of the confectionary segment has been constrained as some areas have been reserved for the small-scale sector. Total de-reservation of confectionaries would, therefore, be in interest of the industry, they said. President of

Indian Confectionary Manufacturers Association (ICMA) BK Gurbani told mediapersons about the anamoly in the government's excise duty structure. "Several food processing industries have been granted relief in the form of exemption from excise duty and a concessional duty of 8% has been levied on some of them. However, many confectionary items like chewing gums, bubble gums, chocolates and sugar confectionary containing cocoa attract a high excise duty of 16%. These items, being meant for children, should attract low excise duty," he said. He said industries producing biscuits, ice creams, instant mixes, pasta food and potato chips were flourishing well as they were totally exempted from excise duty. Gurbani said the government should encourage the growth of the confectionary industry, a major segment of the food processing sector. A McKenzie study has said the industry has the potential to grow to over Rs 5,000

crore and benefit farmers and provide employment. The government had recently de-reserved the ice cream and biscuit industry and consumers benefited from a marked improvement in quality, he said. The ICMA president also appealed to the Union health ministry to defer implementation of notification no GSR 491 (E) relating to labelling of some products which was difficult for compliance. He suggested that the matter be referred to a technical committee for review. ----- KPMG suggests regulator to prop up ailing sugar industry http://www.financialexpress.com/fe_full_story.php?content_id=169588 ASHOK B

SHARMA Posted online : Tuesday, July 10, 2007 at 0000 hours IST NEW DELHI, JUL 9 : Audit firm KPMG has mooted regulatory modifications to bail out the ailing sugar industry. The firm has suggested an independent regulator for the industry for centralised implementation of various regulatory provisions and decreasing the present weight of sugar in the WPI from the current 3.6%. Unveiling its study ‘The Indian Sugar Industry – Sector Roadmap 2017’, KPMG said domestic sugar consumption would reach 28.5 million tonne in 2017 from 19.5 million tonne at present. Thus it was necessary to target production in excess of domestic consumption, given the high cost of imports and strategic importance of sugar, it said. The sector would need to produce 32 million tonne by 2017. The country will produce about 28 million tonne in the 2006-07 season. The study said, as there had been fundamental changes in the consumer profiles, it was time to re-evaluate the regulatory mechanisms governing the commodity. “Due to fundamental change in the consumer profile and demonstrated ability of the industry to ensure availability of sugar for domestic market, we feel inclusion of sugar in the Essential Commodity Act needs to be re-evaluated,” said KPMG advisory services executive director Arvind Mahajan. Change Of Status? • Abolition of the monthly release mechanism • Discontinuation of levy sugar for ration shops• Alignment of cane and sugar prices across India Other regulatory modifications suggested abolition of the monthly release mechanism and discontinuation of levy sugar for ration shops, alignment of cane and sugar prices across the country using a structured formula, and continuation of command

area for cane supply. The study also suggests that the minimum distance between mills should account for regional variations, with a national minimum benchmark of 25 km. The study also recommends creation of a strategic stock for sugar that would enable the government to intervene as a market participant, rather than through the monthly release mechanism. Besides regulatory modifications, the study also suggested augmenting the inherent potential of the industry by effectively using industrial by-products to add to the revenue stream. The study said the co-generation opportunity could add 9,700 mw to meet almost 6% of additional power requirement by 2017 and generate almost 48 million carbon credits.------ Monsoon hits cultivation hard http://www.financialexpress.com/fe_full_story.php?content_id=170152 ASHOK B SHARMA Posted online: Monday, July 16, 2007 at 0038 hours IST NEW DELHI, JUL 15: Heavy downpour and floods in some parts of the country have led to loss of life and property, including standing crops and farm animals. According to the recent reports received by the national disaster management division (NDMD) in the Union home ministry, about 12,838 villages in 135 districts of the country have been severely affected. The situation has caused a loss of 57,046 farm animals and about 1702553.58 hectare of cropped area have been submerged. The total loss to crops, households and public property is estimated at Rs 2,44,25.85 lakh (Rs 2442.585 million) While death of

856 persons have been recorded, the number of affected population is estimated at 105,26,956 (reports received till July 12, 2007). According to NDMD relief and rescue operations were undertaken in Uttarakhand, Arunachal Pradesh, Assam, Gujarat, Orissa, Rajasthan, West Bengal and in some other parts of the country. The causes of floods are due to heavy downpour at places and rise in river basins due to excess water flow from upper riparian regions. The official weather forecasting agency, India Meteorological Department (IMD) has reported 18% more rainfall over the country in the first one and half month of the monsoon season. According to IMD the average cumulative rainfall over the country has been 310.8 mm as against the normal of 262.6 mm in the period. About 41% of 533 meteorological districts received excess rainfall, while 30% received normal rains. Only 22% districts received deficient rainfall

and 7% districts received scanty rains. Out of 36 meteorological subdivisions, 19 received excess rainfall, while 10 received normal rains. Only 7 meteorological subdivisions which received deficient rainfall in the period are in a contiguous zone—Arunachal Pradesh, Assam and Meghalaya, Sikkim and north Bengal, Bihar, Jharkhand, eastern UP and eastern MP. NATURE’S FURY • Rainfall 18% more than normal• 19 met subdivision get excess rains • Flood loss estimated at Rs 2,44,25.85 lakh (Rs 2442.585 million)• Erratic rainfall in June delayed sowing• Millet, cotton, groundnut, soybean, castor in good stead According to the Central Water Commission total water storage in 78 major reservoirs in different parts of the country by July 12, this year had increased to 60.211 billion cubic metre (BCM), representing 45% of the storage capacity at full reservoir level (FRL). In the corresponding period in the

previous year water storage was only 34% of the capacity at FRL. However, the area coverage under several summer crops is not impressive. According to reports available with the crop weather watch group in the Union agriculture ministry, area coverage under rice, cereals, sugarcane, jute, pulses and some oilseeds is lagging behind. Few crops which have recorded an increase in area coverage are jowar (millet), cotton, groundnut, soybean and castor. According the Union agriculture ministry the delay in the progress of monsoon in several parts of the country in June considerably delayed the sowing operations and crops in some rainfed areas were under severe moisture stress due to intermittent dry spells. In some areas, there were cases of submergence of crops due to floods and heavy downpour. The ministry, however, hopes that the situation is likely to improve in the remaining months with balanced and equitable

distribution of rainfall.---------

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