Indian agriculture scenario and commodity prices; Why is there growth in biotech crops in US – A study

Indian agriculture scenario and commodity prices

Reports indicate a dip in agriculture production. From an average of 4.7 percent growth in the eighth five year plan in agriculture, the growth in agriculture has dipped to 1.2 percent in the first three years of the tenth five year plan (2002-2007). Also if reports are correct, there has been a steep decrease in the number of people involved in agriculture. In 1971 almost 71 percent of the population was engaged in cultivation, in 1991 it dropped to 66 percent in in 2002 only 60 percent of the Indian population is engaged in cultivation. This is based on a National sample survey Organizations household and liability survey 2005.

As the agriculture production is dependent on monsoon, which has been playing taunt last year, reports indicate, India may not have enough wheat to fulfil the requirements of its growing population. Analysts believe India would need to import almost 2 MMT of wheat by April 2006 to cover the deficit. If one goes by the record, Food Corporation of India (FCI) will start the fiscal year 2006 in April with just 1 MMT in its godowns as against 4 MMT as per the norms.

Food Corporation of India (FCI) and Ministry of Agriculture have always maintained that there is a healthy situation on the wheat front and FCI has taken a position on Chicago Board of Trade (CBOT). The big question though is, if imports of wheat do happen as the commodity is required, will the duty be removed? Currently wheat imports attract a duty of 50 percent. Current prices of wheat in South India, are Rs.10,500 ($245) per MT.

As FCI has taken a future potion on wheat and will possibly import, there could be possibility to import maize also as GOI should not be averse to import these commodities to safeguard the interest of end-users (poultry farmers and starch manufacturers) and the consumers. The price of maize is going up and current prices at Nizamabad are ruling at Rs.5600 ($126) per MT. AT various other markets like Bangalore, Hyderabad and south India, the prices are close to Rs.5800 ($130) per MT. The red variety and kesari variety are available in the range of Rs.5800 ($130) to Rs.6125 ($137) per MT at the market yard.

Looking at the US prices, the markets closed at $2.0375 per bushel ($80.20 per MT) on Dec -09, a little higher than the $79.88 per MT on Dec 02. The FOB prices for Dec/Jan delivery was $102 per MT (US Gulf), while the FOB (PNW) was $115 per MR for the same. In 2005, the US corn crop is the second largest in the history.

More details about US commodity prices are available at

http://www.grains.org/buying/market_perspectives/mp_12-09-05.pdf

Why is there growth in biotech crops in US – A study

A study conducted by US National centre for Food and Agriculture Policy indicates that the US farmers are adopting biotechnology derived crop varieties with greater confidence and ease as these crop increase the benefits to the farmers, environment and the consumers.

In 2004, a total of 118 million acres (47.2 million ha) was planted by US farmers, an increase of 11% over 2003. The study examined six biotech crops planted in the United States in 2004 — maize, soybeans, cotton, papaya, canola and squash — and the study is based on data from the U.S. Department of Agriculture's, National Agricultural Statistics Service (NASS) and surveys of crop specialists.

Environmentally, biotech crops also reduced pesticide use by 34%, (7,000 tonnes) over 2003. Their adoption increased the food production by 3 million tons, providing an additional $ 2.3 billion to the net returns to US growers.

According to the study, insect-resistant crops produced the greatest yield increase among the crops studied. While insect-resistant traits increased production, herbicide-resistant varieties generated the greatest reduction in production costs by reducing the amount of pesticide needed and lowering costs associated with hand weeding and mechanical cultivation. herbicide-resistant varieties cut costs by U.S.$1.8 billion and reduced pesticide use.

It is not only the economic and production benefits that accrue from the biotech crops, it is also reduced the need to plow the fields (using no-till method), thus leaving there soil undisturbed, reducing soil erosion and pesticide run-off.

The complete study, "Biotechnology-Derived Crops Planted in 2004 — Impacts on U.S. Agriculture," which came out in early Dec 20005 can be found at
http://www.ncfap.org/whatwedo/pdf/2004biotechimpacts.pdf

Amit Sachdev
Representative
U S Grains Council, India
bluecross303@gmail.com

December 12, 2005