The Hindu Business Line : Grains of trouble

New Delhi may refuse to publicly acknowledge it; but farm output prospects are slowly turning grim in the wake of a marked slowdown in the planting of major crops — wheat, oilseeds and pulses — and increasing susceptibility to weather aberrations. Wheat, in particular, faces the risk of a setback because of soil moisture deficiency in key growing areas and acreage reduction. This could, in turn, throw the market fundamentals — not only of wheat, but ofe ntire grains and oilseeds complex too — out of gear. There is no denying that the next wheat harvest — due by end-March 2008 — is set to fall considerably short of the 74.9 million tonnes of 2007. Even with that near-record crop, if government procurement in 2007 fell far short of the target (11 million tonnes versus versus 15 million tonnes), what will happen four months from now is anybody’s guess. Foreseeing this, the government continues to purchase wheat from abroad at seemingly fancy prices.

It may also be time for a rethink on the minimum support price policy as practised at present — hiking prices without corresponding productivity gains. Prospects for other crops — oilseeds and pulses — are none-too-bright either. The rapeseed/mustard harvest could be smaller than last year’s, while pulses are unlikely to show any increase. Sooner than later, the market would take cognisance of the growing risks to indigenous supplies in the first half of the next year and one can expect prices to harden. The global market is unlikely to provide any relief as the bull-run in many agricultural commodities is far from over.

A real challenge on the price front awaits policymakers in New Delhi; and the situation could be exacerbated with the uncertain political scenario. It may be a matter of some consolation that the outlook for 2008 world wheat crop is favourable and forward prices (April-June 2008) are beginning to ease. New Delhi needs to plan for imports in a disciplined manner — for goods to arrive in the second half of 2008. A dialogue could be started with select suppliers — Russia, Canada, Australia, for instance — for import on government account. There should, however, be no compromise on quality standards and phyto-sanitary inspection. There is a case for easing plant quarantine procedures in the case of pulses. Unifying the rate of Customs duty on crude and refined vegetable oils will help reduce the supply time lag and check speculation in the market. This will ensure substantial inflow of ready-to-market refined oils, reduce the stranglehold of large refineries and bring relief to consumers. Last, but not the least, the pubic distribution system needs to be strengthened and supplies augmented with the addition of edible oil and pulses for the poor.

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