Commodity Update; Lessons from Hong Kong

Commodity Update

This week government of India finalized further imports of 1.5 – 2 MMT of wheat to fill it the Food Corporation of India godowns, clearly indicating shortfall in crop and higher market prices for wheat in the open market.

The first shipment of wheat in due to arrive in the southern port sometime in first or second week of April 2006. If the prices remain stable or nose dive is yet to be seen.

Corn prices on the other hand are stable, even though the demand is fairly low due to avian influenza in some poultry pockets in west India. The prices of some varieties showed an upward trend, particularly Red, up from $127 per MT last week to $ 138 per MT this week. Yellow maize also showed an upward trend from $136 per MT to $ 141 per MT at the market yard.

With supplies running low in parts most parts of the country and very limited arrivals, the prices are likely to remain high. In some states like Andhra Pradesh and Bihar the prices soften a bit from $130 and $143 per MT to $118 & $ 137 per MT respectively, but in states like Rajasthan the prices increased from $138 per MT to $144 per MT. in Tamil Nadu, the prices declined from $120 per MT to $112 per MT in the market yard due to new crop arrivals and low demand from the poultry sector.

The corn prices in US at CBOT jumped to $92.91 per MT for May 2006 delivery and increase of $6.79 per MT over last week. The indicative FOB values though remained stable at $108 – 109 per MT from US Gulf.

Detailed report can be seen at the following link.

http://www.grains.org/galleries/market_perspectives/Market%20Perspectives%203-31-06.pdf
The low demand is a temporary phenomenon and the production cycle is likely to revive in another 6 – 8 weeks after which normal hatching will start. This will bring back some demand in the market.

The poultry consumption is down all across the country, one of the reason is bird flu scare and the second is the festival season across the country, where 9 days of vegetarian diet takes precedence. There is a possibility that the industry will see the some of the consumption coming back after the festival is over.

Lessons from Hong Kong

Government of Hong Kong, in order to keep bird flu at bay is considering a series of long term measures, one of them being a ban on wet markets in the city. An area close to the boundary has been identified for a proposed central poultry slaughter plant, which is likely to come into operation in 2009. The plant capacity with be 40,000 chicken and 3,000 pigeons per day. The plant capacity will be increased to 60,000 chicken per day.

The plant will have a covered area of 10,500 sq meters and will cost $ 25.64 million. The trucks will deliver live birds from the farms and will go back to the farms only after complete sanitization.

As in other Asian countries, the residents of Hong Kong prefer to purchase live chickens and get them slaughtered and there is a thriving wet market system in all over China and Hong Kong. The trade currently employs some 3000 poultry retailers and wholesalers, ho will be effected due to this change in the chicken supply, but the change will certainly benefit the city dwellers and the community as a whole.

Municipal Corporation of Delhi has already passed an order in Nov 2004, which does not allow street slaughter of birds. The order also specifies the shop sizes and the systems that need to be followed for sale of meat under hygienic conditions in the city of Delhi. With Delhi Agricultural Marketing Board (DAMB) proposing a 40,000 birds processing unit at the Delhi Poultry Market, the solution for the supply of hygienic chicken in Delhi is not far. As the city of Delhi gets ready for 2010 Commonwealth Games, the Municipal Corporation of Delhi and Delhi Government must gear up to provide infrastructure which would make available processed hygienic chicken to the citizens and tourists in Delhi.

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

March 31, 2006