Cotton gains on limited stocks and China demand

Cotton prices have gained in the last few days on lower arrivals, inadequate stocks with ginning mills and demand from domestic spinning mills and China.

The Shankar-6 variety, which is in demand for exports, has increased to Rs 40,000 for a candy of 356 in Gujarat markets from Rs 38,000 at the beginning of this month. Similarly, LRA and H-4 varieties, too, have increased by over Rs 1,000 a candy.

“Cotton prices are moving up mainly on demand from China. Ginning mills are not having adequate stocks to meet the demand,” said Mr Anand Poppat, Secretary, Saurashtra Ginners Association.

“Demand from China is good. Export prospects are also good,” said Mr M.P. Patel, Chairman of Jaydeep Cotton Fibres Pvt Ltd, from Rajkot in Gujarat.

The rise has been reflected in raw cotton or kapas prices too. “Kapas are quoting at Rs 900-940 for a maund of 20 kg since arrivals began just a couple of days ago,” said Mr Kalpesh Posiya, a trader at Dhoraji in Gujarat. “Ginning mills are trying to build inventories as stocks with them are low,” he said.

ARRIVALS
Currently, 40,000 bales (170 kg each) a day are arriving throughout the country with Gujarat accounting for 12,000-15,000 bales.

“Arrivals will begin picking up after Diwali. Though prices are rising, corrections are taking place now and then,” said Mr Patel.

“Arrivals will peak only during the second week of November. Even then, we expect a firm trend in prices,” said Mr Poppat.

IMPORT QUOTA
China's cotton import quota expires on December 25 and buyers there must get in the consignments before that.

“If the consignments have to reach before the expiry of their import quota, then contracts will have to be shipped out before November 30. Therefore, prices will rule firm until then,” said Mr Poppat.

China's cotton export had dropped in August by 13.8 per cent, though overall imports increased for the year.The depreciation in the rupee is also keeping exporters interested since a firm dollar is getting them good margins.

NO RESTRICTION ON EXPORTS
“With the Government announcing that there will be no restriction on exports from this season that started this month, exports will do well,” said Mr Patel.

Exports, on the heels of a projected record production, are expected to be around 70 lakh bales against 83 lakh bales last season. A higher crop in the US could result in exports from India being lower next year.

The higher crop prospects in the US have led to cotton futures dropping to $1.0051 a pound. This is over 50 per cent lower after prices hit a record $2.197 in March.

In the domestic market, prices for Shankar-6 increased to a record of over Rs 63,000 a candy in March before beginning to slide on poor demand and consumption.

Meanwhile, the current cotton crop is reported to be excellent. Mr Patel and Mr Poppat said that the crop development was good.

The Cotton Advisory Board, which has representation from the trade, farmers, exporters, textile and agriculture ministry besides the industry, has pegged this season's crop at a record 355 lakh bales against last season's 325 lakh bales. The higher production has been aided by the acreage under the crop rising to 121 lakh hectares from 111 lakh hectares last year.The Agriculture Ministry sees the crop at over 360 lakh bales, while a section of exporters, too, is projecting the crop at around 365 lakh bales.

Meanwhile, exporters and traders said that rumours of the Centre extending a five per cent subsidy for cotton exports.

“They are mere rumours,” said Mr Poppat.

“We have not heard anything of that sort,” said Mr Patel.

In some trade circles, the rise in cotton prices, particularly on Wednesday, was attributed to the rumours of export subsidy.

Exporters said with prospects looking good, subsidy was unlikely. (HinduBusinessLine)

Chana rises on strong cues from physical markets

Chana futures spurted by almost Rs. 50 per quintal today triggered by strong buoyancy in both domestic mandies and imported chana along with strong export demand of kabuli chana.

As per market sources, strong gains were reported in all the major mandies as the spot prices of chana at Delhi mandi gained almost Rs. 50 per quintal today. The prices of chana Annagiri and Chapa quality were trading in the range of Rs. 3600-3700 per quintal.

Similar trend was also seen in imported pulses as the spot prices of Australian and Tanzania chana were trading at Rs. 3300 and Rs. 3050 per quintal respectively at Mumbai port with the gain of over Rs. 25 per quintal today.

Moreover, trade sources revealed that India's chana export demand might reach 1.85 lakh tonnes in the current year against 0.95 lakh tonnes that were reported from the last year. This is mainly due to weak export supplies of Kabuli chana from both Mexico (-61%) and Australia ( -35%) at international market

Consequently, the NCDEX November futures increased by more than Rs. 50 per quintal to trade at Rs. 3236 per quintal today.

Sugar export decision deferred till early November

The Government today said it will take a decision on allowing sugar exports in the 2011-12 marketing year in the first week of November after assessing global prices and reconciling local production estimates.

In the 2010-11 marketing year (October-September), the Government had allowed exports of 2.6 million tonnes of sugar.

“I will take a decision on sugar exports in the first week of November after evaluating our production estimates, the international and domestic price situation,” the Food Minister, Mr K.V. Thomas, told presspersons on the sidelines of an event here.

Yesterday, the Minister had said that sugar exports will be allowed in phases and the quantity of shipments will be decided after reconciling this year’s production estimates.

Mr Thomas also said that the production forecast for sugar in 2011-12 will be reconciled and finalised after meeting the Agriculture Minister, Mr Sharad Pawar, in the next few days.

Last month, the Food Ministry had pegged sugar output at 24.6 million tonnes for the year, up from 24.3 mt in 2010-11. The Ministry’s estimates are, however, lower than the Agriculture Ministry’s estimate of 25 mt of sugar production.

The sugar industry has estimated production of 26-26.5 mt of sugar this year.

Pulses trade association upset with additional margin on chana

Upset with sudden hike in the margin for only buy positions on desi chana (chickpeas) that has precipitated a sharp decline in local market prices, the domestic pulses trade has petitioned the market regulator to revoke the additional 10 per cent margin that has taken effect from September 30.

Arguing that the steep 20 per cent fall in chana prices as a consequence of increase in margin was ill-timed, India Pulses and Grains Association, the apex body for the country's pulses and grains trade, has cautioned that the move may prove counter-productive because chana planting for the upcoming rabi season is set to commence soon and any price decline will send out wrong signals to the growers.

The association has expressed apprehension that the sudden fall in prices is likely to prompt importers to cancel or settle their import contracts (for chana as well as its close substitute yellow peas) as there will be no price parity. A considerably weaker rupee has already pushed the cost of imported material higher.

According to the estimate of the Agriculture Ministry, chana production during 2010-11 was a record 80 lakh tonnes.

However, the association believes the actual crop size could be considerably lower at about 60 lakh tonnes. This substantiated by the fact that the physical market price of chana was at least Rs 2,500 a tonne higher than futures prices, the association pointed out.

The pulses trade has argued that the imposition of additional 10 per cent margin will lead to severe shortage in the coming months due to lower imports and shortfall in production next year due to lower plantings.

It is of course unclear what considerations lay with the regulator in announcing a hike in margin. This incident once again brings to the fore the need for more in-depth product knowledge and market knowledge that exchange officials and the regulator must possess.

Clearly, there are several stakeholders in the commodity market and several dimensions to any issue including prices. It is necessary to exercise caution in matters that affect market prices of essential food products. A process of stakeholder consultation is advisable.

India's Oil Meals Exports Rise By 48% During April To Sept 2011

The Solvent Extractors’ Association of India has just compiled the export data for export of oilmeals for the month of September 2011 and reported at 394,877 tonnes compared to 354,252 tonnes in September 2010. The export of oilmeals during April-September 2011 is reported at 2,034,117 tonnes compared to 1,376,209 tonnes during the same period of last year i.e. up by 48%

During current oil year 2010-11 (Nov.’10 to Sept. ’11) export of oilmeals increased due to:

a) Sharp increased in oilseeds production during current year (2010-11) compared to previous year (2009-10).
b) Increased availability of oilseeds lead to higher crushing and production of oil and meals for domestic and export and
c) Good crushing parity due to high price of oils and export demand for oilmeals. It may be noted during 2009-10, due to lower production of oilseeds, coupled with disparity & lower demand, the export was down to lowest in last few years.

Oilmeal import by Japan from India during April-September 2011 was reported at 498,249 tonnes compared to 388,778 tonnes last year consisting of 485,055 tonnes of soybean meal and 13,194 tonnes of rapeseed meal. Vietnam imported 249,123 tonnes compared to 224,342 tonnes last year consisting of 155,442 tonnes of soybean meal, 17,666 tonnes of rapeseed meal and entire quantity of 76,015 tonnes of rice bran extraction. China imported 216,749 tonnes compared to 182,007 tonnes, consisting 209,465 tonnes of rapeseed meal, 2,288 tonnes of groundnut meal and 4,996 tonnes of soybean meal. South Korea imported 338,746 tonnes compared to 181,803 tonnes of last year, consisting of 144,374 tonnes of castor seed meal, 192,026 tonnes of rapeseed meal and 2,346 tonnes of soybean meal. Europe and other countries have imported about 49,833 tonnes compared to 10,571 tonnes of last year.

India Likely To Face Shortfall In Refined Palm Oil

According to a leading vegetable oil analyst, Dorab Mistry, India may face a shortage in refined palm oil imports in the next three months as leading supplier Indonesia doesn't have the capacity to meet a likely surge in demand following tax cuts on its product. Although, Indonesia will expand its refining capacity in future, but it will take at least two years to meet India's demand.

Indonesia, the world's biggest palm oil producer and exporter, has reduced its export tax on refined, bleached and deodorized palm olein in bulk to 8% from 15% and raised the duty on crude palm oil to 6.5% from 15% effective Sept. 15 to encourage domestic refining.

India is the world's largest importer of vegetable oil and imports mainly from Indonesia and Malaysia.The country imports about 6 million tons of palm oil. With Indonesia slashing the export tax on refined edible oil, Indian industry is apprehensive that this may lead to a surge in imports, affecting Indian refiners. India has an edible oil refining capacity of 20 million metric tons a year and imports almost 80% of its edible oil requirement as crude oil. Higher imports of refined products will hurt local refiners.

Earlier last week, India's edible oil industry sought a hike in the import tax on refined palm oil to 16.5% in a bid to control imports from Indonesia and to encourage local oilseeds crushing.India's food ministry is backing local refiners' demand for a higher import tax on refined edible oil to prevent cheap foreign supplies from flooding the market.

Food Minister K.V. Thomas has said that the ministry has put up the matter before the ministries of finance as well as trade for taking a holistic view.

The ministry has also favored the industry's demand for increasing the base value on which import tax is calculated. The base value is currently $484/ton for refined palm oil, much lower than the market price of about $1,200/ton.

Dorab Mistry has further said that if the Indian government raises the base tariff value of refined palm oil to the current price level, it may be viable for importers to continue crude palm oil imports.

Rains not to affect wheat production

Allaying fears that the recent rains may damage wheat crop, the government today said the recent downpours in North India will not affect productivity and output of the staple food-grain. "Recent rains will not adversely impact wheat productivity and production, "Agriculture Commissioner Gurbachan Singh told reporters.

He, however, said the cool weather that creates moisture in the crop (due to rains triggered by western disturbances) may further delay arrival of the wheat crop in the mandis. Wheat arrival in the mandis has already been delayed by two weeks in the major producing regions.

Giving reasons for the delay, he said wheat harvested by the farmers contain moisture because of rains and they have to be dried before moving them to the mandis. Western disturbances are common during this time of the year.

"If western disturbances are followed by too much of rains, hailstorm and winds, then it is a matter of concern," he added.

Western disturbances is continuing and it is more this year as compared to the last year, he said. Singh said 60 per cent of the wheat crops in Punjab and Haryana are yet to be harvested. He said wheat yields are expected to be better than last year as the cool weather is contributing to better productivity of the produce. Wheat harvesting which started from April one is yet to pick up.

The Commissioner said that there may not be a problem in harvesting as Meteorological Department has forecast clear weather in the next 15 days. The country is all set to witness a bumper wheat production of 84.27 million tonnes in the current crop year (July-June).

MCX launches Gold Petal futures contract

Multi Commodity Exchange of India(MCX) today said it has launched one gram gold futures contract -'Gold Petal'.

Currently, Gold Petal May and June, 2011 contracts have been offered for trading, a MCX release said here.

"Gold is considered as an investment option and has now become a part of portfolio of many investors and hedge funds. Availability of Gold Petal, which can act as an SIP product, will attract the retail participants,"MCX Managing Director and CEO Lamon Rutten said.

The trading unit of the gold contract is one gram and price quote for the contract is ex-Mumbai (which is inclusive of all taxes and levies relating to import duty, customs duty but excludes sales tax or VAT, any other additional tax or surcharge on sales tax, local taxes and octroi).

The delivery of contract is possible in dematerialised or physical form. The physical delivery would be available in multiples of eight grams coins with London Bullion Manufacturers Association (LBMA) certified 999 purity, the release said.

The delivery centres is G4 Securitas at Mumbai and other centres are at New Delhi, Ahmedabad, Hyderabad, Chennai,Bangalore and Kolkata.

Apart from Gold Petal, the other gold contracts that the exchange offers are Gold (1 Kg), Gold Mini (100 grams) andGold Guinea (8 grams).

Sugar may become marginally dearer

Domestic sugar prices are likely to witness a modest rise over the next six months if global crude oil prices remain firm as Brazil could go for greater use of ethanol, rating agency ICRA said today. "If international crude oil prices remain high, Brazilian sugar producers might opt for more ethanol. This could exert upward pressure on sugar prices leading to more exports from India and extending a marginal push to domestic prices," S Majumdar, analyst, ICRA told PTI.
Crude oil prices are already ruling high and a further rise would most certainly lead sugar makers of Brazil, the world's largest producer, to go for more ethanol production. India, world's second largest producer and the biggest consumer, is most likely to produce anything between 24-25 Million Tonnes of sugar in current sugar year (October- September) against the domestic demand of around 23 MT, he said.

"With likely exports of 1.5 MT, the surplus would be a maximum of 0.5 MT,"Majumdar added. Anticipating higher production, government has allowed mills to meet their export obligations of about one million tonnes.

Recently, an empowered group of ministers on food decided to allow sugar mills to export another five lakh tones through Open General Licence (OGL). The Food Ministry, however, is understood to be in no hurry to issue the necessary clearances for the same. Majumdar said in case the government releases further export order answering to the industry's plea in the face of hardening international sugar prices, the country might start the next year with only a marginal surplus. This could lead to sugar prices going up.

Domestic sugar prices started recovering since the steep decline seen during February - August 2010 largely driven by an increase in demand during the festive season, a fall in the sugar releases during October-November 2010 and a rise in the international sugar prices. Sugar prices in retail market are currently ruling at 32 per kg as against Rs 48 in January 2010.

CACP suggests PPP model for food grains procurement

The Commission for Agriculture Costs and Prices (CACP) has suggested the government rope in the private sector along with state agency FCI for undertaking procurement of foodgrains from farmers. "If we are thinking of public-private partnership (PPP) model in building warehouses, why don't we have a PPP model in food grains procurement also? This is the biggest idea that the commission is floating to the government," CACP Chairman Ashok Gulati said in an interview to PTI.

The PPP model is necessary to enthuse competition to the FCI, which has not been able to procure foodgrains at Minimum Support Price (MSP) level in many parts of the country, he said. The entry of private sector will not only enable farmers get MSP but also solve storage problems, Gulati said. "Let the farmers decide whom to sell their produce. The government can open up the procurement operations to private companies like ITC, Hariyali Kisaan Bazaar, Tatas and Birlas and also cooperatives like IFFCO and Nafed”, he said.

The CACP has made this suggestion in its recent report submitted to the Agriculture Ministry Founded in 1965, it is a statutory body and advises the government on the pricing policy for major farm items. Gulati recommended the government allow the private sector into procurement operations on the same terms and conditions given to Food Corporation of India (FCI). "If private firms do better job than FCI at lower cost that would be their profit. The Centre should just give the FCI cost and ask companies to deliver foodgrains wherever the government requires,"he said.

Presently, procurement and distribution of foodgrains is being undertaken by the FCI on government's behalf. It procures on an average around 55 million tonnes of rice and wheat through more than 14,000 procurement centres annually. Gulati pointed out the FCI has still not set up procurement centres in many parts of the country. As a result, farmers are compelled to sell below the MSP. For instance in Eastern Uttar Pradesh, wheat is being sold at Rs 1,020 per quintal, against the MSP of Rs 1,120 per quintal."If the real market price is below the MSP, there is something seriously wrong”, he said.

Wheat procurement dips in Haryana

Wheat procurement is lower by 76. per cent so far this year at 9.15 lakh tonnes mainly because of delay in harvest in Haryana. The government had procured 37.88 lakh tonnes in the same period last year, according to the latest data of Food Corporation of India (FCI).

Wheat procurement starts from the middle of March and picks up from April 1. The process ends in June. Haryana, which had contributed 28 per cent of the total procurement of 225 lakh tonnes in the 2010-11 marketing year (April-March), has procured only 44,012 tonnes till yesterday as against 20.25 lakh tonnes in the same period last year. The sharp fall in procurement is because of delay in wheat harvesting in the state. As a result, the arrival of crop in Haryana mandis so far has been only 44,569 tonnes as compared with 20.25 lakh tonnes in the year-ago period.

The procurement in Punjab, which procured the maximum 102 lakh tonnes last year, has also not picked up yet. Only 1,435 tonnes have been procured so far compared with 6.08 lakh tonnes in the corresponding period of last year. In Madhya Pradesh, wheat procurement has declined to 8.61 lakh tonnes so far against 11.32 lakh tonnes in the year-ago period even though the state is paying Rs 100 per quintal more to farmers than the Centre's minimum support price (MSP) of Rs.1,120 per quintal.

Arrivals of wheat in MP have also declined to 10.61 lakh tonnes till yesterday against 14.31 lakh tonnes in the review period.

FCI and other state agencies have procured 6,077 tonnes of wheat in Gujarat so far against 624 tonnes in the entire 2010-11 marketing year. The government had procured 22.5 million tonnes of wheat in the entire 2010-11 marketing year (April-March). FCI expects the procurement to touch 26.2 million tonnes in 2011-12 as output is estimated to be a record 84.27 million tonnes in 2010-11 crop year (July-June).

Record foodgrain output could ease inflation moderately

The projected higher foodgrain production in India in 2010-11 could ease food inflation moderately, according to a global research body. "Higher foodgrain production in 2010-11 coupled with agood monsoon bodes well for a moderation in food prices pressure, and would also prompt lower foodgrain imports,"Citi Investment Research and Analysis (CIRA), a division of Citigroup Global Markets Inc, said in a report.

While pulses and wheat prices have already come off, higher production would support some moderation in prices, particularly on sugarcane and fibres, the report said. Giving details, the report said that food inflation has been seeing a steady deceleration to 13 per cent on year-on-year as on March 11 from 18 per cent levels earlier this year.

It further said,"As the largest importer of pulses, record high pulse production could lower import dependence." The report hopes that on the back of a bumper wheat production, the government would lift the export ban on wheat which has been in place since 2007 as well as on non-basmati rice (in place since 2008).

The country is estimated to produce 84.27 million tonnes of wheat in 2010-11 crop year (July-June). According to the Agriculture Ministry's projection the country is estimated to harvest a record 235.88 million tonnes of foodgrains in the 2010-11 crop year.

Onion prices to cool down soon

Finance Minister Pranab Mukhrejee today expressed hope that prices of onions, which touched a high of over Rs 80 per kg last month, will soon decline due to measures taken by the government.

"We have already reduced import duty to zero level. Therefore, I do hope some improvement and moderation will take place,"Mukherjee told reporters on the sidelines of a conference organised by accounting body ICAI.

Retail prices of onions had surged to Rs 70-85 per kg on December 20-21 in major cities across the country due to crop damage in Maharashtra caused by abnormal rainfall.

Maharashtra and Karnataka are the two major onion- producing states in the country, accounting for 40 per cent of the average annual output of 12 million tonnes.

The government had banned exports and removed import duty on onions to boost domestic supply and curb rising prices. Private traders have already imported over 5,000 tonnes of onions via road through Amritsar.

As of today, retail prices of onions continue to rule at the high level of Rs 45-60 a kg in metros, but are likely to decline after the arrival of fresh crops from Maharashtra and Gujarat, which are expected to hit the market by January 15.

In Delhi, onions are being sold at Rs 50-60 per kg, but there were reports that in some posh colonies, vendors are even charging Rs 65-70/kg. Mother Dairy was selling onions at Rs 45-47 a kg yesterday at its 400 outlets.

According to reports from the other three metros, onion prices in the retail markets of Kolkata and Mumbai remained unchanged at Rs 45-50 per kg, but in Chennai, they fell to Rs 56 a kg from Rs 60-65 per kg yesterday.

With a view to provide immediate relief to the common man, state-owned trading firms PEC, STC and MMTC are importing at least 1,000 tonnes of onions from Pakistan, which will be offloaded in retail markets across the country by state governments.

The onions imported by the state-run trading firms - which cost around Rs 30 per kg -are likely to start arriving in the country from the end of this week.

Top officials in the Delhi government yesterday said the Centre has agreed to provide 300 tonnes of onions to Delhi out of the total quantity being imported from Pakistan and these will be sold at select outlets at about Rs 35 per kg.

Meanwhile, wholesale prices of onions in Delhi's Azadpur market remained unchanged at Rs 45/kg, even though arrivals slowed down to 600 tonnes today from 800 tonnes yesterday.-PTI

Govt unlikely to increase import duty on edible oils

Amid rising prices of cooking oil, the government is unlikely to increase import duty on crude and refined edible oils that currently stands at zero and 7.5 per cent, respectively.

"There will not be any increase in import duty of crude and refined edible oils,"a senior government official told reporters.

To protect the domestic processors from cheaper imports, industry body Solvent Extractors Association of India (SEA) has been demanding an increase in the import duty on edible oils.

However, rising food inflation, which has increased to 14.44 per cent for the week ended December 18, 2010, has forced the government not to tweak the existing duty structure.

Currently with a zero import duty on crude palm oil, the domestic pricing of oil is directly exposed to price fluctuations in palm and soybean in the global markets.

In Delhi's retail markets, prices of sunflower oil increased to Rs 108/kg today from Rs 72/kg in the same period last year, according to official data.

Similarly, mustard oil and soya oil prices have risen to Rs 77/kg each from Rs 62-72/kg in the review period, it showed,.

India, the world's biggest edible oil buyer, had imported 8.82 million tonnes of vegetable oil from the global market in the 2009-10 oil year, which runs from November to October.

On Food Subsidy Bill, the official said the subsidy is expected to rise to over 81,000 crore in the 2010-11 fiscal from last year's Rs 72,000 crore due to higher minimum support price and extra allocation of foodgrains through ration shops.-PTI

Govt notifies procedures for 5 lakh tonnes sugar export via OGL

The government has notified procedures for regular export of 5,00,000 tonnes of sugar, out of which the country's top two makers Bajaj Hindustan and Balrampur Chini have got permission to ship over 33,000 tonnes.

"The export quota of five lakh tonnes has been pro-rated among sugar factories by taking into account their three years'average production,"as per the circular issued by the Food Ministry.

In case of a factory that has not operated in one of the three years, the export quota has been arrived on the basis of two year's average production, it said.

Last year's sugar production has been taken into account for those mills which started operation in 2009-10 sugar year (October-September), the circular added.

With sugar output estimated to cross the annual demand of 23 million tonnes, Food and Agriculture Minister Sharad Pawar had recently announced that the government would export five lakh tonnes of sugar under the open general licence (OGL) scheme to benefit from high global prices.

OGL is a permit the government gives to mills to export sugar without any restriction and conditions.

The export under OGL would be over and above the export obligation of about 1.5 million tonnes of sugar via the Advance License Scheme (ALS) and imported stocks stuck at ports.

In order to give equal export opportunity under OGL, the Food Ministry has fixed the quota between 40 and 3,000 tonnes per mill to more than 500-odd sugar factories.

The government has fixed the export quota of 18,812 tonnes for Bajaj Hindustan, while that of 14,436 tonnes for Balrampur Chini. Leading sugar refiner Renuka Sugars has been allowed to ship nearly 5,000 tonnes of sugar.

The mills have to export sugar produced in the 2010-11 sugar year in their own factory or can source the sweetener from other factory to minimise transporation costs, it said.

India, the world's second biggest sugar producer but largest consumer, is estimated to produce 24.5 million tonnes of sugar in the 2010-11 crop year, as against 19 million tonnes last year.-PTI

Onion prices still high at Rs 40-65 per kg in metros

Onion prices continue to rule at high levels in metros across the country, where the staple vegetable is being sold for Rs 40-65/kg, depending on the quality.

Onion prices stood at Rs 40-50 per kg in the retail markets of the national capital, Mumbai and Kolkata today, but the commodity was dearer in Chennai, at Rs 60-65 per kg, according to reports from these centres.

Traders in Delhi's Azadpur mandi said onion prices are unlikely to witness a sharp fall before the arrival of fresh crops, which is expected to begin by the middle of this month.

The supply of onions from Rajasthan to Delhi has been low due to higher retail prices in Jaipur and other cities in the state vis-a-vis the national capital, they said, adding that the Gujjar agitation has also affected supply.

In order to provide relief to consumers, the Centre plans to sell imported onions in retail markets through outlets of Mother Dairy.

State-owned trading agencies PEC and STC have entered agreements for the import of 1,000 tonnes of onions from Pakistan and these would start coming to India this week, sources had said yesterday.

On December 20-21, onion prices had skyrocketed to Rs 70-85/kg in major cities from Rs 30-35 in early December due to crop damage in the key growing states of Maharashtra and Karnataka on account of abnormal rainfall.

The Centre had banned onion exports and abolished import duty to boost domestic supply and curb rising onion prices, which helped bring down the prices to some extent. However, they are still quite high.

According to government data, onion retail prices stood at Rs 52/kg in Delhi and Mumbai, Rs 50/kg in Chennai and Rs 40/kg in Kolkata on December 31, 2010.-PTI

60% duty on sugar imports from 1st January 2011

With India's sugar production set to exceed domestic demand, the government has decided the zero duty regime on sugar imports to lapse, which in effect will restore 60% duty on the sweetener.

Import duty on sugar was abolished in early 2009 to boost domestic supply as there was a shortfall in output in 2008-09 sugar year (October-September). Before that, the duty on sugar import was 60%.

According to senior government official, there is no need for a fresh notification with the validity of duty-free import notification (on sugar) lapsing on 1st January 2011. It will automatically revert to 60% duty. If required, government can seek a reduction in duty later.

India had imported about six million tonnes of sugar since February 2009 to meet domestic demand. Sugar production of India, the world’s second largest producer, had declined to 147 lakh tonnes in 2008-09 against the annual domestic demand of 230 lakh tonnes. In 2009-10, the production improved to 190 lakh tonnes, but it was still short of demand.

However, in the current sugar year, the production is expected to rise to 245 lakh tonnes and the country has now begun exporting the sweetener. Prices have also softened to Rs.30-Rs.32 per kg from nearly Rs.50 per kg in mid-January.

On sugar exports, the official said the government will notify the procedures for export of five lakh tonnes of sugar under the open general licence (OGL) scheme next week.

Food and agriculture minister Sharad Pawar had announced that the government will allow regular export of five lakh tonnes of sugar to benefit from high global prices. He had also said that the food ministry will work out the export procedures in 10 days.

Sugar prices to remain firm in the year 2009-10

Over the past few days, sugar prices shot up on fall in production and ever increasing demand. Nearing festivals and wedding season has given a boost to the rising prices. Moreover, with the imported raw sugar lying idle at ports as a result of UP government not allowing its mills to process it unless crushing in the state is over, is also making sugar pricier. Mills owners also attribute the rising prices on lower availability of sugar in the market. The Central Government has made available 16.39 lakh tonnes of sugar for the month of January which the market participants feel is not enough to meet the domestic demand. Also, a high international price is also fueling the price rise across the country.

Sugar prices crossed the psychological mark of Rs.40 per kg last week in the retail market. Prices had been firm throughout the year 2008-09 on mismatch of demand and supply. Prices had been ruling over Rs.30 per kg in the retail for the last one year and the consumers are now more or less habited to paying the price. Although, the ministries concerned with the price rise has been ensuring people that every thing would be fine in the coming days, as steps are being taken to ensure that prices do not keep touching new heights. But, the fact is that prices are not expected to come down soon as prices are determined by demand and supply situation. As far as supply is concerned, it may increase in the short term and prices may soften a bit, however, overall production is still estimated to remain around 160 lakh tonnes which is much lower than actual demand for sugar.

According to Food and Agriculture Minister Sharad Pawar, India is expected to produce only 150 to 160 lakh tonnes of sugar in 2009-10 and the present firmness in the sugar price would remain for a year. The estimated production in the year 2008-09 was 145 lakh tonnes.

The rise in production will be mainly because of higher diversion of sugarcane to the mills manufacturing sugar. Last year, apart from monsoon playing havoc on sugar cane production, diversion of sugarcane to the khandsari and gur manufacturers were other factors that supported higher sugar prices. Although, this year the administration has taken some steps in this regard, yet, diversion cannot be ruled out. Farmers sell their crop to khandsari and gur manufacturers as they get instant payment on delivery unlike, in sugar mills, where arrears are paid later after realization of sugar. In October 2009, Venus Sugar Ltd in Uttar Pradesh (UP) had secured a Court order restraining the operation of kolhus (manufacturers of gur) in the cane area assigned to it by the State Government. Further, sugar mills located in Uttar Pradesh are paying around Rs.220 per quintal for cane purchased by them against Centre’s Fair and Remunerative Price of Rs.129 per quintal.

Sugar production in Maharashtra is set to rise marginally this season on higher cane crushing. The state is likely to produce 48 lakh tonnes in the sugar year 2009/10 that began in October, slightly higher from 46 lakh tonnes produced a year ago. Although, the state is expected to crush more sugarcane this year, however, production would rise marginally on fall in the sugar recovery. In the first quarter of the sugar season (October to December) millers have produced 22 lakh tonnes of sugar which is 2.8 percent higher compared to last year’s corresponding figure.

However, production in Uttar Pradesh is expected to remain flat this year due to a number of causes. First, delay in the start of crushing will affect the recovery of sugar in the state. Second, though this time less sugar cane would be diverted towards jaggery manufacturing yet, bad monsoon had already affected the cane production in the state. Third, the UP government ban on imports of raw sugar following protests by farmers who said overseas purchases suppressed cane prices and curtailed their bargaining power with mills has locked up 15 lakh tonnes of raw sugar in ports. As of now mills in Uttar Pradesh, India's second-largest producer churned out 17 lakh tonnes of sugar against 18 lakh tonnes last year in the same period (October to December).

India is expected to consume over 230 lakh tonnes of sugar in 2009-10. The deficit would have to be met by imports and from last year’s buffer stocks. However, India doesn’t have enough buffer stocks {The current 2009-10 season (October-September) opened with domestic white sugar stocks of around 31 lakh tonnes.} to bridge the widening gap between fall in production and expected demand. Even if the country manages to bring some stability in the prices using the stocks that it has with it right now, it would definitely face shortage in the next year as there would be hardly any carry over stocks. Moreover, record global prices do not sound good for Indian consumers who will have to shell out more this year to purchase sugar. Sugar prices have already crossed the Rs.40 per kg in the retail market and the next target for the present Central Government is to watch consumers pay Rs.50 per kg in the coming days.

Minimum Support Prices of Various Agriculutral Commodities

@ Upto 2004-05 Statutory Minimum Price (SMP) linked to a basic recovery of 8.5 % with proportionate premium for every 0.1% increase in recovery above that level. The SMP for 2002-03 includes the one time drought relief of Rs. 5 per quintal recommended by CACP. From 2005-06 onwards SMP is linked to basic recovery of 9.0%. Sugarcane SMP is linked to 9.5 per cent and, above that, there would be a premium of Rs.1.13 for every 0.1 percentage point increase.

+ An additional incentive bonuus of Rs. 50 per quintal was payable over the Minimum Support Price(MSP).

++ An additional incentive bonuus of Rs. 100 per quintal was payable over the Minimum Support Price(MSP).

^ Includes Rs.10 special drought relief.

**Includes Rs.20 special drought relief.

-From 12.06.2008

*Medium Staple.
**Long Staple.
& An additional incentive bonus of Rs. 40 per quintal was payable on procurement between 1.10.2006 to 31.03.2007,

In case of Bihar and Kerala additional incentive bonus extended upto 31.5.2007 and in case of Andhra Pradesh, Chhatisgarh, Orissa, Tamil Nadu and West Bengal additional incentive bonus extended upto 30.9.2007.

Consumers should be ready to pay more for sugar

Distressed at not getting an adequate price for his produce, a debt-ridden sugarcane farmer in Uttar Pradesh committed suicide. In order to repay his loans, he wanted to sell his produce for a minimum of Rs.270 per quintal.

After protests from the farmers and pressures from the opposition over sugar pricing which favored sugar mills, the government has made it clear that the difference between the fair and remunerative price (FRP) and state-advised price (SAP) would have to be paid by the mills and not by state governments.

The government had earlier announced the new sugar pricing policy which was rejected by the farmers. Instead of SMP (statutory minimum price), a Fair and Remunerative Price (FRP) of Rs.129.82 per quintal linked to 9.5 sugar recovery was announced for the current season (2009-10). The guidelines under the new policy also stated that anything above the FRP would be borne by the state government which often announced SAP higher by 30 to 40 per cent than SMP. As a result, SMP of Rs.107 per quintal became meaningless which was announced earlier (Last year SMP was Rs.82.25 per quintal). State Advised Price (SAP) in Uttar Pradesh varies from Rs.165 to Rs.170 per quintal, depending on the quality of sugarcane. In reality, sugar mills pay over SAP to the farmers.

As a result, farmers were not happy as the FRP announced was much below SAP at a time when sugar mills were making huge profits. The farmers protesting against government new move had two demands.

1. Withdraw the provision that makes state liable to pay the difference if it fixes an SAP higher than FRP.
2. Pay farmers a price of Rs.280 per quintal.

Farmers feared that as state would have to pay the differences, it will stop announcing its own SAP because it could not afford to pay the difference. Further, the SAP announced by the UP government was un-remunerative as farmers believed that anything below Rs.250 to Rs.280 per quintal was not fair.
Not happy with the sugar mills offer, sugarcane growers in some some parts of Uttar Pradesh have decided to set-up co-operative crushers and crush their cane themselves. Farmers at the moment are not ready to sell their produce till they are paid Rs.280 per quintal. The deadlock has resulted in slow progress of cane crushing and is likely to affect production.

Over the past few months, the scenario in Indian sugar sector has not been good for the farmers. Sugar prices touched peak often due to faulty government policies and inadequate actions on industry estimates which had been voicing their concerns to the government that production for the season 2008-09 is expected to fall drastically due to bad monsoon. There were also reports that farmers in Maharashtra were converting their standing crop into fodder to feed their cattle and sell the rest on remunerative prices. Further, farmers in Uttar Pradesh were more than eager to sell their produce to jaggery manufacturers who were paying higher prices than sugar mills and that too instantly. All these factors along with government not responding swiftly to minimize the differences in demand-supply allowed sugar mills to make handsome profits.

India’s sugar production is estimated at 16 million tonnes for 2009-10 against 14.7 million tonnes last year, while the estimated total annual consumption is pegged at 23.5 million tonnes. However, last season (2008-09), the government had a carryover stock of 9.5 million tonnes which provided some relief to the sector.

The Union government has taken numerous steps at different times to check the rising prices and though, it helped a bit, yet sugar is currently trading around Rs.40 per kg in the retail market. The government had earlier (this year) allowed the import of raw sugar for refined and domestic consumption against export of refined sugar. Further, to check hoardings, the port charges for storing sugar were raised sharply to force traders to vacate godowns (warehouse) immediately after custom clearance. Also, the Ministry of Consumer Affairs has directed that no bulk consumers whose consumption is more than ten quintals annually could store sugar beyond fifteen days’ requirements in its godowns.

In spite of all these steps, Indian consumers should be ready to pay more for sugar as the commodity is already trading at a peak at a time when prices should be lower. Delay in crushing in northern states should be a warning to the Central government to be more prudent in sugar sector policies.