A ‘Real’ blow for exporters

A sharp fall in Brazilian Real against the US dollar has made Indian exporters – mainly coffee, sugar, corn and soyameal – turn jittery as the currency slide in the South American nation is seen eroding their competitive advantage.

As a result, the Indian commodities which compete with the Brazilian shipments have turned expensive in the world market, prompting some of the buyers to seek a discount. On a year-on-year basis, the Brazilian Real has been devalued by about 40 per cent. The real, which traded against the dollar at around 2.2 levels in March last year, is now hovering around 3.1, while witnessing a sharp decline in recent weeks. Over the past one year, the rupee has moved 4 per cent against the dollar.

“India has been completely out-priced in the world market because of the Brazilian devaluation,” said Tejinder Narang, Grains Trade Analyst. While the shipments of Indian commodities such as corn, sugar, coffee and soyameal have been impacted by the weak real, the imports of soya oil will turn out cheaper. India, a large buyer of edible oils, imports close to 2.2 million tonnes of soyabean oil from the South American countries such as Brazil and Argentina.

“The devalued real has made Brazilian coffee more attractive now. As a result, there is pressure on us to cut our rates,” said Ramesh Rajah, President of the Coffee Exporters Association.

Brazil, the world’s largest and low cost producer of coffee, has been shipping more as the growers there – whose earnings are intact despite the volatile currency movements – are offering to sell more. As a result, the Brazilian exporters are shipping out more coffee while influencing the prices of other Central American countries such as Peru and Honduras.

Rajah said the buyers want us to match our prices to that of the Central American producers and are seeking a discount to an extent of up to 10 per cent. On the contrary, the Indian growers are not keen to sell in anticipation of better prices, a trend that has contributed to slower shipments. “There is a mismatch between the buyers’ and growers’ expectations,” Rajah added.

The coffee exports in calendar 2015 from January till March end are down by about 16 per cent at 84,258 tonnes against corresponding last year’s 97,684 tonnes.

“It (decline in real) has come in as a double whammy for Indian exporters,” said Raju Choksi, Vice-President at Anil Nutrients Ltd, a feed manufacturer, who also exports corn. The exports of corn from India this year have been lagging as the high local price has made it uncompetitive for exports. “Besides, there were very few export opportunities this year,” he added. Also, the soyameal exports have been sluggish as the high domestic price has made the overseas shipments unviable.

Similarly in the case of sugar, Brazilian exporters have been flooding the world markets, posing a tough challenge for their Indian counterparts. The ₹4,000/tonne subsidy provided by the government to ship out raw sugar has not yielded any positive result as the Indian exporters have hardly contracted around 2 lakh tonnes, against the projected 14 lakh tonnes, trade sources said.

Further, the decline in crude oil prices has also influenced the production of ethanol in Brazil resulting in higher sugar production, Narang said.

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