Climate change and price instability, biggest challenges in commodities sector: experts

The Agri Conclave promoted by MCX in association with BusinessLine has recommended holistic solutions for pepper and cardamom that would balance the interests of growers and consumers and at the same time promote value addition for exports.

The focus of the session was on growers. The panellists were unanimous in their view that growers should get remunerative returns to continue in farming. However, issues such as fluctuating production, volatile prices due to climate vagaries discouraged processors and exporters from taking a long-term view. It was also argued that the sector needed investments to develop climate-resilient varieties.

MIP in pepper

There are also contrasting views on the imposition of minimum import price (MIP) on pepper. While this may have been intended to support domestic prices, there is a view that it actually distorts the market and prevents natural price discovery.

Suggesting farmers to look at net farm returns rather than price per kilo, Philip Kuruvilla, an industry veteran, urged scientists to take efforts to increase net farm returns.

To achieve this, he said innovation has to take place at farm level with local technology for selection and multiplication of high-yielding varieties.

There is a need to shift the focus from commodity to manufactured product to reduce price risks and gain high value-addition. With direct selling opportunities in online sales platforms, he said farmers should be in a position to value add and sell directly to consumers.

Shaji Varghese, President of Cochin Chamber of Commerce and Industry pointed out that besides pepper and cardamom, other related commodities like cashew, tea, rubber, etc too are passing through a difficult phase due to price drop.

To achieve competitiveness and revival of the sector, he suggested captive farming, digitilisation in different stages, increasing productivity, enhancing transparency, developing in-house marketing as well as attracting younger generation to farming.

Quality material

Later in the panel discussion, V Unnnikrishnan, Senior Vice-President, AV Thomas Group of Companies, highlighted climate change, price instability, labour shortage as the biggest challenge in the commodities sector. It is important for a crop like cardamom and pepper to employ experienced hands to get optimum yield.

Today, the sector is forced to depend on migrant labour, who lack expertise in farm-related activities.

Given the fact that quality planting material is the need of the hour during the times of climate changes which is affecting production, AB Rema Shree, Director (R&D), Spices Board, said that the Board has developed several high yielding pepper varieties which gives maximum yield. She also suggested to maintain export oriented quality control at the farm level.

Since pepper production has been on the rise globally, Prakash Namboodiri, Chairman, All India Spices Exporters Forum, suggested the need for collaborative work between all the stakeholders for the survival of the industry. “India should not try to work in isolation. We should be in sync with the global trends,” he said.

MCX delivery centre

Deepak Mehta, Head – Energy & Agri, MCX, said the exchange is planning to start additional delivery centre for cardamom at Bodinayakannur in Tamil Nadu for the next season to improve physical deliveries.

There are also plans to rejuvenate black pepper contracts this month, as the markets right now are illiquid due to various factors.

According to G Chandrasekhar, Commodities Market specialist, the pepper market is full of uncertainties. There is production uncertainty, quality uncertainty, market uncertainty. All these risks converged into one factor, which is price. If the price risk is managed properly, one would have managed all other underline risks. Therefore, price risk management is critical.

“It is erroneous to believe that hedging is speculation. The fact is not hedging is speculation,” he added.

Indian market is increasingly integrating with global market through its trade and investment route.

Therefore stakeholders in the pepper value chain must have a world view rather than only domestic view, he said.

Rajalakshmi Nirmal, Deputy Editor, BusinessLine , moderated the panel discussion. Earlier, Lokeshwari SK, Associate Editor and Chief of the Research Bureau, BusinessLine , welcomed the gathering comprising producers, traders, exporters and industry bodies.

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