Monitoring Agricultural Outlook for India: The Supply Side Challenges of Food Security Presentation By Shashanka Bhide, NCAER, New Delhi At UN ESCAP South Asia Policy Dialogue on Regional Cooperation for Strengthening National Food Security Strategies August 13-14, 2013 New Delhi
Acknowledgements National Food Security Mission Project Team at NCAER Most data are from Official Statistics
Outline of the Presentation (1) Backdrop (2) Drivers of Agricultural Outlook in the Medium Term (3) An assessment of the medium term prospects
Backdrop Ministry of Agriculture, Government of India, commissioned a project to NCAER to bring out short term and medium term Agricultural Outlook Reports focusing on food commodities. This 3- year project began towards the end of 2011 with the objective of integrating wide range of information available on the food sector and provide insights into the future scenarios. Starting from June 2012, five Quarterly Reports and one semiannual Medium Term Outlook Reports have been brought out so far. FAO is supporting supplementary activity in terms of collection of additional data and modelling alternative policy scenarios
A Framework for Assessing Agricultural Outlook Global prospects for supply and demand conditions: availability and prices of imports and demand and competitiveness of exports Policy support for agriculture: incentives for investment and productivity growth Emerging supply- demand balances for food commodities emerging from economy, policies, monsoon and inputs Regional variations within the country: need for spatial shifts; need for integrated markets
Sources of Information on Global Perspectives WB, IMF, UN: Overall economic growth, inflation, international prices, currencies, trade, population trends FAO, FAO-OECD reports, databases Agricultural Outlook 2013-2022 Food price indices USDA, ABARES, IGC, FAPRI Pulses?
The national food economy Production prospects: Monsoon, market environment for producers, investment, input supplies, technology The market: Income growth, market infrastructure, policies Adjustment to imbalances: Prices, stocks, consumption Assessing sustainability of strategies: Supply-demand imbalances, water scenarios, fiscal pressures, lack of incentives to producers and supply chain, high food inflation
Monsoon Matters: Agricultural Production Index and Monsoon Rainfall as % of Normal 130 120 110 100 90 80 70 60 50 40 PROD INDEX RAIN RAIN PROD INDEX (Estimated)
Drivers Of Outlook In The Medium Term
What Will Drive Production?
1950-51 1955-56 1960-61 1965-66 1970-71 1975-76 1980-81 1985-86 1990-91 1995-96 2000-01 2005-06 2010-11 % of GDP (constant prices) Declining Share of Agriculture in the Economy 60 50 40 30 20 Agriculture & allied activities Agriculture 10 0
Challenge of Small Farms 120 100 80 60 40 20 0 2.5 2.0 1.5 1.0 0.5 0.0 No. of farm holdings with <= 1 ha (million) Avg holding size (ha) (Right)
Productivity Growth Driving Production: All Crops Indices, Average % Change Per Year Item 1980-81 to 1989-90 1990-91 to 1999-00 2000-01 to 2011-12 Area 0.10 0.27 0.97 Yield 2.56 1.33 3.27 Production 3.19 2.29 2.76
1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Productivity Growth Drives Production Growth: Rice Indices % Change YOY 150 140 130 120 110 100 90 80 RCE_A RCE_Q RCE_Y
What Drives Productivity?
Productivity drivers Investments (Irrigation, infrastructure, technology) Input use (Fertilisers, machinery, new seeds) Higher value addition Spatial shifts in production Better terms of trade
Producer Prices Keep Up with Input Costs: Price Indices 448 398 348 298 248 198 148 98 Index of Prices Received Index of prices paid 448 398 348 298 248 198 148 98 104 103 102 101 100 99 98 Index of Prices Received Index of prices paid Index of Terms of Trade (Right)
Trends in the Ratio of Output Price to Input prices (%) Commodity Input 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Food grain Diesel 89.5 94.0 104.2 107.0 125.1 115.0 109.8 Electricity 98.2 106.2 113.3 124.4 145.3 138.5 136.5 Fertiliser 104.9 117.3 123.1 136.0 153.8 149.3 136.3 Note: Ratios are based on wholesale price indices.
But Food Prices Rise: WPI, % Change YOY 12 11.1 10 8.5 9.0 9.5 10.1 9.8 8 6 4 3.6 6.1 4.5 5.4 4.7 5.7 2 1.8 2.2 1.9 0 0.0 Cereals Pulses Vegetables Fruits Milk Edible oils Sugar All commodities 2000-05 2005-12
Accommodating Global Prices: FAO Price Indices 300.0 250.0 200.0 150.0 100.0 50.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Cereals Price Index Food Price Index
What is supply responding to? Rising income levels Urbanisation The Food Security Bill
Net Availability of Food Items: Grams/ day Item 1990 2000 2011 (P) Rice 212 204 189 Wheat 133 160 165 Cereals 432 423 424 Pulses 41 32 39 Edible oil 18 26 41 Sugar 13 16 18 Milk 174 214 285 Net Availability= Production- (Seed, Feed, Wastage) + Imports Exports + (Beginning Stocks Closing stocks) P = Provisional
THE MEDIUM TERM OUTLOOK
Commodity Medium Term Projections and comparisons Estimates for 2012-13 2016-17 Working Group Projections 2016-17 Alternative scenarios Rice 104.2 98-106 119.6-121.6 Wheat 93.6 93-104 93.3-100.6 Coarse cereals 39.5 42-49 46.5-50.2 Cereals 237.3 240-251 263.1-268.7 Pulses 18.0 18-21 18.8 Foodgrain 255.3 258-272 277.8-284.3 Oilseeds 30.7 33-41 42.2-43.7 Potato 42.5 57.0 Onion 16.8 20.3 Banana 30.3 38.8 Sugarcane 336.2 375.4 Milk 132.1 152.7
The Supply Slide Goal: Sustaining food production capacity Concerns: Consumer subsidies and fiscal pressures Fiscal pressures and input subsidies Transition to more efficient markets
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