X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian commodities: Ostriches rule the roost - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 6, 2007

    Indian commodities: Ostriches rule the roost

    Indians are very savvy traders, but individually. The bureaucracy that manages the nation's stocks of agricultural commodities seem to be functioning in a kind of time wrap where the inter-relationships between India and the rest of the world fade into the background chaos. Decisions taken are almost always after the season's produce is in the 'mandis' rather than before the crop is harvested.

    In today's day and age, technological help is just a click away. Thanks to a number of satellites that map each corner of the country as well as the detailed local level administration, Indian 'babus' can easily figure out the area sown every season, the crops sown, and even important variables like the state of water resources. One would feel that to justify the expense of putting up such highly expensive propositions into space, the ministry would proactively use all their inputs to determine the final availability of a particular commodity in any given season. But ground reality is another matter altogether.

    India today has the dubious distinction of leading world prices in sugar and wheat, and unfortunately, both to India's disadvantage!! FY07 had actually seen sugar leading the charge on the Wholesale Price Index, so much so, that a filmmaker actually titled his venture recommending using less of it!! And this year, there is so much cane sown that the ministry is pressurising the sugar mills to start the crushing season. What with the various government rules and regulations, a mill owner actually stands to lose Rs 4 per kg of sugar manufactured. And this loss-making production is to be exported in a scenario where just the expectations of India's bumper production have subdued international sugar prices by 20%!

    The 'Wheat' saga is another case in point. Wheat is a 'rabi' or winter crop in most of India. For two years in a row, wheat production in India was low at 68 to 69 million tonnes (MT). Wheat prices were upwardly mobile and prices of processed foods like biscuits and bread too rose in tandem. Wheat buffer stocks plunged to all time lows. However, to keep the inflationary tendencies in check, the government tried to keep its minimum support prices low at Rs 8.5 per kg and bought 11 MT (15% of the total production of the season).

    Worldwide there were reports of the Russian and Australian crop being lower, but the government did not raise the bar to stock up good quality Indian grain and in the bargain let Indian farmers get a better price for their pains. However, after private mill owners like ITC and Cargill, swept the domestic markets clean at Rs 9.5 per kg, the government decides to import grain in the world market where rates were anyway on the higher side thanks to reduced production in the two of the world's largest producers of wheat. In effect India has ended up paying almost Rs 16.4 for a kilo of this imported wheat. Despite this purchase of 0.8 MT, the wheat buffer stocks at 13.6 MT are lower than the targeted 17 MT.

    To sell in a falling market and buy in a rising market and be the market mover in both cases, seems to sum up India's position to a tee.

     

     

    Equitymaster requests your view! Post a comment on "Indian commodities: Ostriches rule the roost". Click here!

      
     

    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    MARKET STATS