India Agribusiness Report Q1 2013Published by: Business Monitor International Published: Nov. 14, 2012 - 95 Pages Table of Contents
AbstractBMI View: Although a precarious monsoon in the first two months of the rainy season put pressure onsome of India’s key crops, we believe the impact on final production will be limited. Output of rice andsugar will remain above averages, while wheat should showcase a bumper year, as some of its majorgrowing regions were left unscathed from the drought. As we expected, India has not implemented exportrestrictions despite concerns over food prices. In the longer term, India’s vulnerability to exceptionalweather phenomenon should increase due to climate change effects and serious water shortages.However, the country will remain an agricultural powerhouse and should be able to maintain high levelsof self-sufficiency for major food crops. Key Forecasts Sugar production growth to 2016/17: 12.3% to 29.2mn tonnes. Strong growth will be drivenby rising domestic demand that, in turn, will provide production incentives. Palm oil consumption growth to 2017: 35.1% to 10.0mn tonnes. Domestic palm oilconsumption will be propelled by strong demand for domestic food use, which makes up about80% of total domestic palm oil demand. Poultry production to 2016/17: 26.6% to 4.1mn tonnes. The sector will be driven by risingincomes and increased domestic demand as well as the emergence of vertically integratedproducers with reduced consumer prices. It will also come from a raft of investments in thesector designed to improve growth. 2013 real GDP growth: 6.3% (down from 6.9% in 2012; predicted to average 5.6% from 2012to 2017). 2013 consumer price inflation: 7.5% (down from 8.6% in 2012; forecast to average 6.3% from2012 to 2017). 2013 central bank policy rate: 9.0% average (down from 8.1% in 2012).Cooling With The Rain Front-Month CBOT Rice, US$/cwt (monthly chart) & Mumbai Wholesale Rice Prices, INR/100kg Source: BMI, Bloomberg Key Industry Developments The precarious rainfalls in the two first months of the 2012 monsoon delayed and reduced plantings andhave hampered yields and production for the 2012/13 crop. As we expected, India has not implementedexport restrictions on rice despite lower production and serious concerns over the monsoon in June andJuly. Exports are expected to remain historically strong, as the domestic market remains well supplied onhigh stocks and above 10-year average production. However, export volumes will be partly held back bythe return of Thailand to international markets and by higher domestic prices. India’s cabinet approved in September 2012 an amendment to the existing policy on foreign directinvestment (FDI) in single-brand product retail trading in an effort to revive its currently sluggisheconomy. The new legislation will allow foreign retailers to acquire 51% controlling stakes in Indianretailers, and the policy reforms come at a time when the Indian economy is facing its most testing periodfor a number of years. This move represents the first step towards the expanded presence of establishedWestern dairy brands in the Indian market and towards the development of Western dairy products inIndia. As we stated in March 2012, India did not wait long before retaliating to the change in Indonesia’s palmoil export tax regime; in August it ended a six-year-old freeze on the import price of refined palm oleinwhile keeping the crude variety free of duty. Indonesia, the world’s largest palm oil exporter, reducedfrom October 2011 export taxes on processed palm oil products. This made Indian refineriesuncompetitive, as margins for Indian palm oil refineries turned negative. Following India’s move,purchases of refined palm oil started falling in June, while crude palm oil imports rose in August. Get full details about this report >> |
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