Last Updated : 04 February 2013 at 13:30 IST
In an interview with Raju Choksi, Vice-president (agri-commodities) of Anil Nutrients Limited--supplier and manufacturer of animal feed and a 51% subsidiary of Anil Ltd, the parent company which is into starch manufacturing—Rakesh Neelakandan of Commodity Online tries to capture a glimpse of the global as well as Indian picture of animal feed industry. While challenges galore, the drought situation in the US has boded well for Indian animal feed industry, says Raju Choksi.
“On short term basis disparity between the futures prices and physical market remains a challenge. Further, disparity on account of negative crush margins has lead to diminishing crushing pace.” he added.
The complete e-mail interview is provided below:
When it comes to soybean-meal, maize feed demand, what is the global picture? What is the picture in India? For both commodities, what is the supply picture?
Soybean Meal – Prices have come off the record highs of last year and are likely to remain soft to sideways in the next few months. India will have to compete with abundant South American supplies from March onwards. For the crop year 2012/2013 Brazil is expected to harvest a soybean crop of 82.5 million MT which is bigger than that of USA for the first time in history. Argentina is also expected to harvest a record crop of 54.0 million MT.
Corn – Balance sheet for corn is expected to remain tight and prices likely to remain firm. Due to poor monsoon, supply position in India remains inadequate in the face of strong demand from local industries and for export.
What are the challenges that your industry face on a short-term basis? How about the long term challenges?
Soybean meal Industry - On short term basis disparity between the futures prices and physical market remains a challenge. Further, disparity on account of negative crush margins has lead to diminishing crushing pace.
On long term basis, excess crushing capacities against limited raw material availability remains to be a major challenge for this industry. On one hand India has storage problems for the record wheat and rice procured and on the other hand has to import over 10 million metric tonnes of edible oil. The government needs to effectively encourage oilseed cultivation in this scenario.
Corn – New corn milling plants are coming up in the country. Existing starch manufacturers are adding new capacities. Feed use for corn is projected to increase by 10% annually. Against this increasing demand from various sectors the cultivation of corn is not keeping pace.
How well the economic boom in emerging markets has influenced prices of both commodities: (soybean-meal and maize feed)? The affluent middle class is consuming more of meat products. Have economic crises in US, Europe someway affected your prospects?
The prices of the commodities remain a factor of demand and supply situation. While price of soybean meal has come off the record high, price of corn remains relatively firm. The economic crisis in the developed world has not had a major impact on prospects of agri commodities business. This is due to the fact that most of the demand for Indian commodities is from China and south-east Asia. US and Europe have never been major importers for India soybean or maize. In fact, due to drought in US and subsequent fall in production of soybean and maize, export prices of US soybean and maize have gone up, which has actually helped Indian commodities to some extent.
Rupee fluctuation: How it has affected/influenced the industry's prospects of exports-imports?
The rupee volatility has become an additional factor in international trade of agri commodities. Most exporters have started covering their exposures in currency by way of forward booking. Exporters now have technology by their side to hedge their risk in case of volatile currency fluctuation.
Looking into the future, what do you see awaiting the animal feed industry? Where do you see your role? What is your assessment of China as a consumer of animal feed?
Animal feed industry has a very bright future with increasing demand from cattle, poultry and dairy industries on the back of strong economic growth. China is the largest consumer of soybean meal and corn for feed use in the world. China will continue to be the largest consumer as population size and requirement for fulfilling their demand will continue to rise.
How susceptible are you to climatic challenges and vagaries of nature? Take for example the drought in US affecting crops. How do you find the use of hedging platform provided by commodity exchanges?
Agriculture will continue to remain susceptible to vagaries of nature world over. Hedging on commodity exchanges can be a useful tool for people involved in agri commodity business. However, sound knowledge of rules and working of exchanges is necessary. Having sufficient funds to meet margin obligations, which can be quite substantial, is a prerequisite. Small farmers are not capable of using platforms offered by these exchanges and so they have higher risk involved for selling their produce.
What is the animal feed industry expectations pertaining to upcoming union budget?
Levying of export taxes on some essential ingredients like soybean meal and corn in case of adverse domestic supplies has been a longstanding demand of animal feed industry.
Levying of export taxes on some essential ingredients like soybean meal and corn in case of adverse domestic supplies has been a longstanding demand of animal feed industry.
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