Poor raw material availability, leads to higher prices
The prices of almost all grains are on the rise, affecting the profitability of all end user sectors. The wheat and corn situation is probably most alarming of all.
Wheat prices in most a parts are ruling above Rs.7650 ($ 176) per MT. In Madhya Pradesh the prices are at Rs.7950 ($183) per MT. The wheat prices on CBOT were $3.23 per bushel ($118) per MT.
Based on the current estimates provided by GOI, the production of wheat is estimated at 72 MMT (trade puts the estimate lower than 70 MMT). Based on a 72 MMT production and assuming all of this will get consumed, the per capita availability of wheat will be 183 gm per person per day if all 1.06 billion people were to be fed. If 20 percent of the population is discounted the per capita availability will be 232 gm per person per day.
Food Corporation of India has procured 14.7 MMT of wheat this season (the target was fixed at 17 MMT) and had 4.1 MMT of stocks as on April 1, 2005. Already 4.3 MMT of stocks has been allocated and despatched, which would mean 14.5 MMT of stocks as on date. This would effectively mean 1.45 MMT of allocation per month for the next 10 months (Last 2 month allocation 2.15 MMT).
During the period 2000 – 2003, India exported some 14 MMT of wheat. This was due to the huge amount of stocks that were piled up due to faulty distribution system. Some of the FCI wheat was also made available to the poultry and livestock sector. With the distribution system in place now and people getting wheat, there is little hope for the surplus let alone any buffer stocks at the end of the year.
The corn situation is also alarming as the prices are higher than June 2004 prices, specially in states of Bihar, Gujarat, Maharashtra, Rajasthan, Tamilnadu and Uttar Pradesh. The average price in mid June 1004 was Rs.5307 ($122) per MT, while this year the average prices are higher by approximately Rs.500 per ton and averaged Rs.5785 ($133) per MT.
GOI estimates the production at 14.5 MMT for the year 2004-05, while the trade estimates the production at 12.1 – 12.5 MMT during the same period. While the average productivity by GOI has been estimated at 2.07 tons per hac, the trade estimates the productivity at 1.78 tons per hac. Based on the current usage in poultry, livestock, starch and food the requirement will range from 12.9 – 13.3 MMT, without taking into account exports to Bangladesh, Nepal and Sri Lanka.
Corn prices in US closed higher on Friday. CBOT closed higher at $2.29 per bushel ($90.15) per ton fir July delivery. This is higher by $7.48 per ton in one week. (Close on June 10 was $2.10 per bushel - $82.67 per ton). The FOB values were $100 per ton for July delivery. The freight is also steady and going down on almost all routes, which is a very encouraging sign.
The detailed USGC report on US prices can be found at
http://www.grains.org/buying/market_perspectives/mp_6-17-05.pdf
Under certain circumstances, poultry and livestock farmers have used wheat, sorghum and bajra (Pearl Millet) in diets. But these materials can not replace corn completely though some replacement is possible which also compromises the efficiency of production. With the wheat situation so alarming and prices much higher than maize, it will be almost impossible to include wheat in poultry rations. As regards Bajra (Pearl Millet) and Sorghum, the prices are higher than or similar to corn, which does not allow poultry farmers to use these commodities on a large scale.
Under such circumstances, the cost of production of chicken is bound to go up in coming months, if the availability of coarse cereals does not improve and prices do not stabilize. The current cost of production of chicken in South India (under integration) is about Rs.27 ($0.72) per kg, while in North India the cost of production is estimated at Rs.31 ($0.71) per kg. A small increase in feed cost by Rs.0.50 ($0.011) per kg would increase the cost of production in South by Rs.0.87 ($0.02) per kg, while in the North the cost of production would increase by Rs.0.95 ($0.022) per kg.
Cascading effect of delayed monsoon
Under the current situation when monsoon is delayed and several predictions are being made with regard to its onward journey, probably the farmer (whose next years earnings depend on this monsoon) and the end user (whose growth is dependent on this monsoon) are most anxious to know what is going to happen and if and when the south-westerly winds will provide water to the parched Indian soil and the reservoirs.
As the Southwest monsoon gets delayed and takes its own time to revive, speculations on short term and long term effect of this delay can be seen in many of the reports, predicting slowdown of the economy.
Going by the targets fixed and estimates generated, the target for the growth in economy for the period 2002-07 was set at 8 percent on an average. In the first year of the tenth plan (2002-03) the growth was 4%, followed by 8.5% in the second year (2003-04) and a slow down in the third year (2004-05) to 6.9%. The average for the three years being 6.49%. For the current year (2005-06), the growth has been estimated at 6%, which will further bring down the average growth by a few decimal points.
The delay in monsoon affects the sowing, productivity of the crops and also the long term planning of all people who have a stake in India’s agrarian economy. Reports are already coming in of delayed sowing in South and Western parts of the country. If monsoon is further delayed, the GOI will have to be ready with scaling up the Food- for-Work program, which will put pressure on the Food Corporation of India to release more stocks of wheat.
Food Standards – code of hygiene practices
As the poultry industry grows, there will be a need for process chicken and market the same. Though there are national standards as well, prescribed by the Ministry of Food Processing Industries, Government of India under Meat Food Products Order (MFPO) of 1973. While the same has been amended and several changes made, the chilled and frozen chicken is still not covered under the order completely.
For those who wish to produce quality chicken, the code for Hygiene Practice in Poultry processing from Codex Alimentarius can be downloaded, following the link given below.
http://www.codexalimentarius.net/download/standards/163/CXP_014e.pdf
For those who are making value added products, the Recommended International code of Hygienic Practices for Processed meats and Poultry products can be downloaded, following the link given below
http://www.codexalimentarius.net/download/standards/162/CXP_013e.pdf
Amit Sachdev
Representative
U S Grains Council, India
bluecross303@gmail.com
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