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

1. MARKETS, PRICES AND FOOD
SECURITY
A critical assessment of India’s experience
Rabat, Morocco
March 7th, 2012

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 enumerate
Yet…..
• 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. 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 cent
The only edibles that turned cheaper were onions
by 20.33 per cent and wheat by 1.54 per cent.
Source: The Hindu, November 5, 2011

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. 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 limited
Availability 209.98 233.63 • Coarse cereals have lost their charm
for farmers as the state buys more
Total 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. Pulses
• Against a per capita availability of 75
Production grams/day/person in 1958-59,
Pulses Production in India present availability has nosedived
20 below 35 grams/day/person in 2010
• While the Govt. sets a Minimum
10 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. Edible Oils
80 CPO Average Parity • India imports almost 50% of its edible
oil requirement.
60 • CPO (Crude Palm Oil) parity
practically through the year makes
40 most domestic oilseeds
uncompetitive – cultural affinity is
20 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. 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 vegetables
2500 inaccessible to the poor in urban
centers
2000
• On May 1, 2010 bananas cost INR 9
per dozen; on May 1, 2011 – INR 27
1500
per dozen
1000 • Per capita availability low due to 20-
40% post harvest losses
500
• 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. 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. 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. 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. 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. 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. Thank You
For further information,
Please contact
vnsaroja@agriwatch.com
www.agriwatch.com