Markets, Prices And Food Security


Published on

A short presentation on how prices are affecting food security in India and what can be done

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Markets, Prices And Food Security

  1. 1. MARKETS, PRICES AND FOOD SECURITY A critical assessment of India’s experience Rabat, Morocco March 7th, 2012
  2. 2. • India’s Economy is growing at 6-8% p.a for the last 5 years• India is a top 5 producer and consumer of almost all agricultural outputs including milk, fruits and vegetables, cereals, pulses and spices.• Proportion of those classified below poverty line has fallen by most methodologies used to enumerateYet…..• India continues to be home to around 25% of the world’s hungry population• Nearly half of India’s children under three years of age continue to remain malnourished, as per the National Family Health Survey, alongside half of pregnant mothers who are anaemic.• Food price inflation periodically worsens access by squeezing consumption levels in the lower socio-economic sections.
  3. 3. In October 2011….The WPI data released showed that on a year-on-year basis prices of – Vegetables were higher by 28.89 per cent – Pulses turned dearer by 11.65 per cent – Fruits by 11.63 per cent – Milk by 11.73 per cent. – Eggs, meat and fish more expensive by 13.36 per centThe only edibles that turned cheaper were onionsby 20.33 per cent and wheat by 1.54 per cent. Source: The Hindu, November 5, 2011
  4. 4. So India… is the eternal Work in Progress• Has innumerable examples of the successes and the failures in providing food security• Still undecided between market economics and socialist controls especially in agriculture• It is great in planning and intentions, but not as good in execution Makes it a great example to learn from
  5. 5. Cereals Rice and Wheat • In spite of ample cereals being produced, supply chain issues have Supply & Disposition (in Mn T) led to pockets of the country facing low availability MY 2010- MY 2011- • With 30% of the production being 11 12 picked up the state at a preset Minimum Support Price, private Total trade is very limitedAvailability 209.98 233.63 • Coarse cereals have lost their charm for farmers as the state buys moreTotal Usage 164.25 174.30 and more rice and wheat – society loses its taste for the more nutritious Ending cereals Stocks 45.73 59.33 • Exports are controlled except for corn – farmers cannot leverage international supply – demand gaps
  6. 6. Pulses • Against a per capita availability of 75 Production grams/day/person in 1958-59, Pulses Production in India present availability has nosedived20 below 35 grams/day/person in 2010 • While the Govt. sets a Minimum10 Support Price, it rarely procures, 0 leaving the market open to exploitation • Current availability (domestic production of 11-13 Mn T and imports of 2-3 Mn T) is deemed current demand ignoring latent demand that lack of availability is Production hiding. • Average increase in prices of pulses between 2008 and 2010 close to 100%
  7. 7. Edible Oils80 CPO Average Parity • India imports almost 50% of its edible oil requirement.60 • CPO (Crude Palm Oil) parity practically through the year makes40 most domestic oilseeds uncompetitive – cultural affinity is20 the only thing keeping the farmers investing in mustard, groundnut and 0 coconut oils. Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct • The profitability of market-20 participants is vulnerable to risks emanating from weak harvests;-40 commodity price volatility and forex movements 3 Yr Avg. Spread 2009-10 2010-11-60
  8. 8. Vegetables and Fruits POTATO PRICES IN TWO CENTERS • Still a localized market system with a In INR/100 kg predominantly fresh market with processing below 10%3000 • Most fruits and vegetables2500 inaccessible to the poor in urban centers2000 • On May 1, 2010 bananas cost INR 9 per dozen; on May 1, 2011 – INR 271500 per dozen1000 • Per capita availability low due to 20- 40% post harvest losses500 • Prices follow cyclicality in many of the crops especially potatoes and onions 0 based on overproduction – below 28-Apr-08 29-May-09 29-May-10 26-May-11 25-Mar-09 02-Aug-09 30-Mar-10 25-Mar-11 01-Oct-09 04-Aug-11 15-Oct-11 24-Nov-08 23-Jan-09 30-Nov-09 29-Jan-10 25-Nov-10 24-Jan-11 18-Feb-08 07-Jul-08 15-Sep-08 28-Jul-10 26-Sep-10 cost farm gate prices - underproduction next season Ludhiana indore
  9. 9. Futures markets yet to mature….• High speculation in commodities like corn and guar, make it difficult for serious players to participate fully• Lack of knowledge of the markets stop farmers and farmer organizations from even entering• Though many research bodies have blamed futures markets for the food inflation, agri-commodities contribute less than 10% of the turnover – Gold, Silver and Crude dominate• The Government appears to struggle to regulate ending up with more ad hoc knee jerk policy changes that true long range planning
  10. 10. India….What works What doesn’t • Entering global markets only when a• Procurement in Rice and Wheat – shortage exists ensure s rise in prices system can be replicated but has and buying at the highest not been • Farmer extension and training so• Public Distribution Systems (PDS) introduction of new technologies is works well for the majority – too slow many food deficit states especially in the NE depend • Agricultural statistics – data collection largely on PDS methodologies not very credible and investment in the same not rising fast• Progressive farmers and enough progressive states continuously improve on their agricultural • Farmer access to export and futures economies, others struggle to markets due to lack of stable policies stay in the same place relatively • Distribution gaps in PDS not always made up by private trade leaving large gaps in the market
  11. 11. Critical issues that could make a difference• Stability in policies – Procurement that is more well spread through the country will provide higher incomes to more farmers and would lower distribution costs for the PDS – Export market access should not be ad hoc but stable so farmers can plan their crops to meet domestic and international market requirements and traders build markets – Better control over futures markets to prevent rampant speculations would encourage legitimate use for hedging. Knee jerk responses by policy makers, make large players wary
  12. 12. Critical Issues….• Treat farmers as entrepreneurs – They are over 50% of the population. Allowing them to earn well should logically solve the food security issues – Invest more in infrastructure that helps farmers negotiate better terms and more markets – Better access to market information to farmers will help them plan better – Cash crops are seductive but are also the leading cause of debt and farmer suicides. They need to taught to diversify risks – Investment in the value chains would help benefit farmers and consumers and reduce intermediaries
  13. 13. Critical issues….• Managing ambitions, income growths and market availability – Production growth needs to keep pace with disposable incomes else real incomes will naturally fall – Urban consumers are more vocal and media access but little knowledge of the value chain. The difference between the farm-gate price and the urban retail price could be as high as 400%. – PDS should start to focus on nutrition now that calories are no longer under threat. Even the proposed National Food Security Bill ignores that
  14. 14. Thank You For further information, Please