India Bullion dealers buying out Gold mines to rise over coming years: Amit Sampat

Last Updated : 01 April 2013 at 11:10 IST

India is the world's biggest consumer of gold with import and consumption figures matched only by China. In this context will it not be prudent for a bullion dealer in India to acquire a gold mine overseas in one of the hassle free regions in the world?

Pushpak Bullions is doing just that!

The company as per its Director, Amit Sampat is “at an advanced stage of negotiations with the sellers” in acquiring a gold mine in Arizona.

Based out of Mumbai's Zaveri Bazar, Pushpak Bullions is one of the leading traders in bullion in Mumbai. Promoted by Chandrakant Patel,the company is involved in the manufacturing and wholesale trading of plain gold jewellery, diamond studded jewellery, gold and silver coins, medallions, bullion bars, precious stones etc.

Rakesh Neelakandan of Commodity Online interviewed Amit Sampat regarding the acquisition and future plans of Pushpak Bullions. As Director, Amit is responsible for overseeing the day to day operations as well as finance and compliance functions of the company.

At what stage do you stand when it comes to acquisition of gold mine/s in Arizona?

We are at an advanced stage of negotiations with the sellers regarding the acquisition of the gold mine in Arizona. We intend to complete the negotiations and proceed towards the acquisition by mid-April/early May.

Could you please tell our readers where the said mine is located and who is the one you denote by the term ‘sellers’? Could you also please tell us why you opted for US and not Africa or Australia or even China? In other words, what is so special about US that attracted you?

As per Non-Disclosure Agreement that has been signed with the sellers, I am unable to provide the name of the sellers till we complete the transaction.

As mentioned, the mine is mentioned in the State of Arizona, USA. It is about 120 miles from Phoenix. We opted for USA as the ease of doing business in USA is far easier than the countries you mention. Besides we have prior experience of operating a mine in USA. We had a stake in Rawhide Mining Corp, Nevada which we exited in 2011.

There are plenty of gold mines available in African region as well. But those mines need to be evaluated on various parameters including the country risk where the mine is available. We do keep looking at a number of these mines and will consider investing in a project if we find the right fit.

What is the next step?

There are a number of steps involved in acquiring a gold mine. We have hired environmentalists to look at permitting issues, geologist to conduct a geological survey of the mine site and give an estimate of gold content, CPA’s and Lawyers to help us structure the deal. We anticipate that all the above steps should be completed in next few days.

What kind of support the Government of India provided as and when you moved on with the acquisition?

We never really approached Government of India for any kind of assistance on this, so I really wouldn’t know if they have any window or provisions for assisting Indian companies investing abroad.

How do you intend to go ahead with the acquisition? Will it be a Joint Venture?

As of now we intend to move ahead on our own. We have received communications from various companies who wish to partner us in this acquisition. However it would be premature to comment on any of those talks at this stage.

How much investment do you think the acquisition of gold mine would take?

We are looking at total investment of around 8-10 million Dollars over next couple of years. This would include payment to sellers, deal expenses as well as capital expenditure required to bring the mine to production stage.

Amit, how will you raise this money?

We are looking at funding the mine with our internal retained earnings.

What amount of gold will the mine yield in its life? When will you start production?

Once the deal is completed, we anticipate that the production will start in 90-105 days. The life of the mine is anticipated to be in excess of 15 years.

Where will you process the ore? And in what form will you bring the gold to India? Isn’t 15 years too small a time period as far as the life of a mine is concerned? What is your opinion?

The ore will be processed on mine site and the concentrate will be sent to nearby refineries for final stage recovery of gold. We do not intend to import the ore to India, but just sell it to LBMA approved refineries in the USA.

Life of the mine depends really on the daily expected production which is a variable that will be decided by us on a later date. Given that, the life of the mine will range from 15 years at an optimistic level and 25 years on realistic level. We feel that this is a fair time period for a mine this size.

How easy or difficult it is to acquire a gold mine lease in North America? What hurdles did you face?

Acquiring or running a gold mine in North America is a very intensive task. The permits and mining laws vary from State to State as well as County to County. So a thorough due diligence is required before going ahead with any acquisition.

Do you think this would be a defining trend in India as more bullion traders would opt for backward integration? Is this a compelling business idea?

For bullion traders, buying a mine would be a good diversification. At the same time, one should also realize that unlike trading, investment in a mine is a capital intensive investment with gestation period of few years. It also means that the companies are stepping away from their core-competency which is trading. So any investment has to be well planned and executed.

As far as being a business idea, it really depends on individual companies – their strengths, the type of mine, prevailing gold prices, cost of production, cost of funds etc. What would make good business sense for one bullion trader might not make sense for another.

But I do expect this trend to rise over coming years. 

As published here: http://www.commodityonline.com/news/india-bullion-dealers-buying-out-gold-mines-to-rise-over-coming-years-amit-sampat-53657-3-53658.html

Capacity addition in times of slowdown would strengthen us: Suryalakshmi Cotton Mills

Last Updated : 14 February 2013 at 17:10 IST

In the era of slowdown only a handful of business entities would open their war chest of cash to expand businesses. Suryalakshmi Cotton Mills Ltd headquartered in Secunderabad in Andhra Pradesh is one among them.

Rakesh Neelakandan of Commodity Online conversed withParitosh K Agarwal of Suryalakshmi Cotton Mills to know more about the company and its expansion plans. Agarwal joined the board of Suryalakshmi Cotton Mills Ltd in September, 1995 as Executive Director and was elevated as Managing Director in June, 2005.

In the meantime the turnover of Suryalakshmi Cotton Mills grew from Rs.65 crores in 1994 – 95 to Rs.670 crores in 2011 – 12. It has a denim manufacturing facility in Ramtek [Maharashtra] and two spinning units [Polyester Cotton and Synthetic Yarn] in Amangallu, in Andhra Pradesh.

E-mail interview is provided below:

Forty million meters/annum of denim capacity! can we know which are your major markets? And who is your major competition?

Our major markets are USA, Europe, Asia and India; the biggest market being India. Our major competition includes mills in Pakistan, turkey and a handful of high quality mills in India. The company caters to the growing need of reputed brands like VF Corporation, Levis, Wal-Mart, Perry Ellis, Jones International, M&S, C&A, ASDA, George, Nest, Miss Sixty, Mango, Carrefour, Sainsbury, Mothercare, Li& Fung and Woolworth among others. We are successfully coping with the competition and would continue to grow.

What is the action plan behind your mission which is outlined on your website? What are your priorities as a business and how do you intend to go out and you know, grab it? Where do you see yourself five years from here?

Our action plan is A) investing in design and development of superior products, B) Be cost effective in our operations, C) Strategic marketing to get desired customers and segments of business, combined with assertive sales operations. We are putting in huge resources and time in
this activities and get good results from the same. We want to make a Rs 1000 crore company in the next two years and then to double the turnover in the next 5 years.

How robust is the financials of Suryalakshmi? Did the Q3 performance make you give a pat on the back?

The profits before tax for the quarter at 7.03 crore was in line with the estimates and it would have been even higher but due to steep increase of power and fuel.

What made Suryalakshmi opt for a captive power plant? What is the percentage of its contribution to Suryalakshmi's power requirements? How viable it is to maintain a power plant and what is the kind of risks involved in it?

The company has opted for a captive power plant due to its uninterrupted hassle free quality power which will take care of the increased power requirements of future growth potential. The capacity is being utilized for company’s denim unit and the balance will be either wheeled to the company’s Spinning Unit at Amanagallu in Andhra Pradesh or will be sold out through the power exchange. It is definitely viable.

What is the purpose behind merger of Suryalakshmi with Suryakiran International Limited?

The rationale behind the merger of Suryakiran International Ltd with Suryalakshmi cotton mills limited is
--To reduce the fixed costs by removing the duplicate activities and lowering the costs of the company relative to the same revenue stream, thus increasing the profit margins.
--To increase the scope of market and distribution of different types of products.
--To increase the revenue and the market share,
--To increase synergy to the managerial economies.
--To take the advantage of losses to bring down the tax liability.

On the proposed spindle spinning unit in Maharashtra: is capacity addition advisable in the age of slowdown?

Company wants to strengthen itself during the slowdown period to become stronger without any time lag when the situation improves. With the backward integration in spinning which the company is planning, bright potential for the spinning in future and the availability of power from company’s captive power plant, company feels that it is the right time to go for expansion.

As published here: http://www.commodityonline.com/news/capacity-addition-in-times-of-slowdown-would-strengthen-us-suryalakshmi-cotton-mills-52825-3-52826.html

'Participation of big players on MCX cannot swing futures wildly'

Last Updated : 13 February 2013 at 16:10 IST

This year, India would complete a decade in commodity futures trading. And India's ten year successful marathon run in futures trading can in no way be divorced from the name Multi Commodity Exchange of India or MCX.

Rakesh Neelakandan of Commodity Online caught up withSumesh Parasrampuria; Director – Business Development, MCX to gather some idea of business development initiatives of India's premier exchange in Metals and Energy space.

Parasurampuria also spoke about MCX's tie-ups with other international exchanges and on market volatility advancing hedging further in scale. He is of the opinion that “participation of big industry players on the Exchange cannot swing markets wildly.”

The e-mail interview is provided below:

What are your plans for educating potential market participants and what is the status of and response to such initiatives? Kindly note that this question applies to big and small potential market participants.

MCX is focused on growing India’s commodity futures market through dissemination of knowledge by conducting awareness programmes, publication of whitepapers, articles and books on various topics relevant to markets, policy, and ecosystem development. In the process, the Exchange engages with physical market participants and myriad of stakeholders.

The Exchange, in collaboration with Forward Markets Commission (FMC) and trade associations, organizes awareness programmes throughout the country. In that way, the Exchange has been contributing to the “inclusion” process through education, enabling various stakeholders to benefit directly or indirectly from the commodity markets.

During 2011-12, about 500 awareness programmes were conducted for farmers alone all across the country, while in 2012-13 (April – October) about 300 programmes have been conducted for farmers.

MCX has conducted about 100 awareness programs targeting SMEs during each of the years 2011-12 and 2012-13, covering diverse sectors and regions of the country.

The Exchange has also taken the lead in organising stakeholders’ meets for varied commodities value chain participants. These meets are aimed at discussing various issues facing market participants and to make these markets more participant-friendly. They have witnessed active participation from corporates, SMEs, hedgers and physical market participants.

What is the kind of tie-ups that MCX has with other international exchanges? Please elaborate on MCX cooperation with LME as well as the response to the road show that took place in December in New Delhi.

With an aim to seamlessly integrate with the global commodities ecosystem, improve trade practices, provide the best services to participants through adoption of global best practices, penetrate new markets and facilitate overall improvement of commodity futures market, MCX has forged strategic alliances with leading international exchanges, various trade bodies and corporates.

The exchange has entered into agreements with the CME and LME to “reference” their prices and help align domestic prices with international benchmarks. Hence, in India, MCX offers the benchmark prices to domestic participants, and integrates the domestic commodity economy with the global economy, thereby helping in reducing the “basis risk” of international trade (when local prices do not move in line with prices in international (derivative) markets). This has enabled SMEs to use domestic exchanges for effective risk management in international commodities, at a low cost.

MCX partnered with LME for its India Road show 2012 held in Mumbai and New Delhi. It witnessed experts from MCX, LME and other renowned speakers provide their valuable insights. It was very successful and received an overwhelming response from the Indian metals industry.

Is current market volatility preventing ordinary market participants from trading on commodity markets?

On the contrary, the need and demand for hedging on commodity futures exchanges increases with rise in price volatility. The continued risk of volatility in commodity prices, a growing number of participants realising the importance of hedging, and the low impact cost of MCX’s contracts, have made the Exchange’s platform attractive for the market participants.

As Indian economy gets more aligned with the global economy, in an attempt to comply with the WTO norms, the need for risk management will only increase further. Moreover, even in domestic commodities, risks are endogenous to the market system, attributed to oversupply, lower demand, change in technology, etc.

This necessitates risk management through an institutionalised risk management platform. Hence, what we foresee is only huge growth for the commodity derivatives sector.

How active are big industry players in metals-energy sector when it comes to hedging risks in futures? Isn’t it a fact that their participation having the potential to swing markets wildly deters them from participating in market activities?

MCX has witnessed healthy participation on all its product offerings and has been successful in attracting participation from all types of market participants, both big and small. We have developed contracts with different lot sizes to accommodate the needs of varied market participants.

MCX’s commodity prices very closely follow the commodity prices on international benchmark exchanges. More importantly, the Exchange is a neutral platform which essentially reflects on how the future might unfold, based on the maximum possible information of the present.

The participation of big industry players on the Exchange cannot swing markets wildly. 

As published here: http://www.commodityonline.com/news/participation-of-big-players-on-mcx-cannot-swing-futures-wildly-52797-3-52798.html

'Soybean Meal: Excess crushing capacities vs. thin raw material supply a challenge'

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.

As published here: http://www.commodityonline.com/news/soybean-meal-excess-crushing-capacities-vs-thin-raw-material-supply-a-challenge-52577-3-52578.html

Interview:- India Pulses: Branding sets benchmarks in quality

Last Updated : 21 September 2012 at 11:55 IST
Branding has always been an attempt to ensure quality and marketability of a product. Since it is difficult for consumers to ensure quality of a product, branding helps them identify items that they can purchase with confidence.

Amit Sreedharan, General Manager at Ishakti Dals, a division of Tata Chemicals talks to Rakesh Neelakandan ofCommodity Online on pulses and their cultivation, branding and kirana shops.

Q: Despite news items repeatedly featuring a surge in production, India always seem to be short of the 3 million tons pulses that it needs. While factoring in growing population and consumption, is there anything peculiar about the 3 million tons of pulses that we need to import. How do you see this conundrum?

A:Pulses is an important element in the diet that meets the protein requirements. From the demand side, as income levels rise, demand for pulses is also growing at a robust rate. As per the statistics, the per capita availability of pulses has fallen over the last 50 years from 60 gm/day/ per person in 1970-71 to 36 gm/day/ per person in 2008.

From the supply side, production is not surging every year. After a record production in 2010-11, the production dipped in 2011-12. This means that the carry forward stocks are getting depleted in some years. Hence, imports are required to keep the balance of stocks. India is a major consumer of pulses and is the world’s largest importer. Many countries in the world watch the Indian price and requirement and plan their acreages.

Q: Kirana shops--stores just around the corner-- still do not store branded pulses to the best of my knowledge. But supermarkets do...How do you view the market penetration of branded pulses?

A: It is not true that kirana stores do not stock pulses. In case of Tata I-Shakti Dals, kirana stores are keeping our pulses. Even many stores categorized as SEC B and C class stores are also selling Tata I-Shakti Dals. They believe that it is a quality product of Tata. There is a section of customers that specifically asks for products with health benefits, like our unpolished dals. With the increase in this awareness among the people, the penetration amongst retailers and customers is increasing.

Q:Are farmers some way deterred when it comes to adopting pulses cultivation? Are they getting remunerative prices? What is your experience, especially in the light of India's drought?

A:Farmers look at their return and make corresponding investment in the field. Our MoPu (More Pulses) production program exactly emphasis this with farmers. We encourage the farmers to follow the package of practices (PoP) and hence increasing the yield.

We have seen an average 25-40% increase in yields in areas where PoP is being followed. This helps in getting more yield/acre and hence better remuneration. Over and above this, the price of pulses have generally been robust through the year.

The government has also raised the MSP for pulses. All these factors are encouraging farmers to take up pulses cultivation. Rains are an important factor in pulses cultivation as most of the areas under pulses cultivation are rain-fed or soil-moisture and do not have irrigation. This time due to late rains, acreage for some may have shifted away in Kharif, but chick-pea sowing during rabi is expected to be very good.

Q:What sort of value addition does branded pulses bring in?

A: The quality of pulses is a very important aspect. Since the entire market is unorganized and of loose product, it is very difficult for the customer to identify what is good quality. Many customers hence rely on the general merchant’s advise. Branded pulses like Tata I-Shakti Dal set a benchmark for quality. We provide very consistent size grains, unpolished, low on moisture and great on taste. This quality assurance from a Tata brand is aiding the customer to make a conscious choice of a consistent quality product.

Q:India has developed many pulses varieties; so do many other countries, mostly targeting India; Are these initiatives creating any meaningful impacts?

A:Yes, many initiatives in terms of varieties are being researched and developed. If pulses demand has to be met by the world in the future, we need many more breakthroughs in this area.

As published in: http://www.commodityonline.com/news/india-pulses-branding-sets-benchmarks-in-quality-50449-3-50450.html

Interview:- Will MSP hike in pulses, oilseeds negatively affect prices

Last Updated : 31 October 2011 at 10:50 IST
The India government, in a bid to incentivize production of oil seeds have decided to give a fillip in the form of MSP(Minimum Support Price) hike for Mustard Seed and several other commodities. Also, the government hiked the MSP for wheat, but not to the same extent that it decided in case of mustard seed.

So, will the hike in MSP for mustard seed affect its prices negatively on the NCDEX? If yes, when and to what extent? Will the hike in MSP’s for oil seed would be at the cost of Wheat production?

Sudha Acharya, oil seed/pulses analyst with Kotak Commodities gives the answers to Rakesh Neelakandan of Commodity Online in an interview.

Q: How effective is the MSP regime when it comes to boosting crop output?

Sudha: The announcement of Minimum Support Price has a positive impact on crop output. It largely helps the farmers to give preference in order to allocate his farm acreage. However one should not forget that MSP is not the key factor to boost the production prospects as there are various other factors like.

a) Weather conditions

b) Rainfall and soil moisture

c) Price during the season

d) Prices for the competitive crop

We have a very good example this year during Kharif season where favorable weather played a very important role in allotment of acreage despite the significant surge in MSP.









Q: To what extent do you think production and productivity of the MSP-hiked commodities would gain?

Sudha: The productivity of any commodity largely depends on the rainfall and weather conditions during the period of crop growth. Also quality of seed sown impacts the productivity and the production. Hence the hike in MSP will not largely impact the production as it is an incentive to the farmers to allocate the land to the commodity while sowing.

Q: Will the hike in MSP for mustard seed affect its prices negatively on the NCDEX? If yes, when and to what extent?

Sudha: The recent hike in Mustard Seed MSP by Rs.550/qtl to Rs.2500 will not have any negative impact on prices due to firm fundamentals. Mustard seed prices traded at NCDEX during 1st to 27th October has rallied from Rs.2663/qtl to Rs.3114/qtl. The rise in price is mainly attributed to declining stocks at NCDEX ware house (from 160556 tons to 90143 tons during 3rd to 25th October 2011) and low inventories with the traders at the cash market.

Q: Chana (and for that matter masoor) are also seen getting a hike in MSP’s. Will the move affect chana prices negatively?

Sudha: Rise in Chana MSP is much higher as compared to other commodities this season. Chana MSP is at Rs.2800/qtl up by Rs.700/qtl as compared to last year. Such a move by the government is made in order to boost the pulses production in Rabi season and to offset the lower output during the Kharif season and also lower the dependence on imports. I do not see any negative impact on prices due to lower inventories and production during the season 2010-11.

Q: Do you feel soybean is getting enough of price support in MSP?

Sudha: I feel that soy beans are not getting enough support through MSP as compared to other oil seed crops this year. As compared to the spot.









Q: Will the hike in MSP’s for oil seed would be at the cost of Wheat production?

Sudha: I don’t feel the hike in MSP for oil seed would be at a cost of wheat production. India’s edible oil imports counts for more than 50% of its annual consumption. Hence, in order to lower the country’s dependence on imports and make the country self reliant we need to give incentive to the farmers to increase the oilseed cultivation. The major reason for discouraging the farmers to cover acreages in Wheat is overflowing stocks with the government of India. Higher stocks are result of record wheat production since last two years as compared to other crops.

As published in: http://www.commodityonline.com/news/Will-MSP-hike-in-pulses-oilseeds-negatively-affect-prices-43339-3-1.html

Interview:- FDI in retail: Prospects of Indian retailers taking over foreign

Extolling the efficiency and competency of Indian retail firms; Professor Piyush Kumar Sinha of IIMA (Indian Institute of Management, Ahmedabad) sheds some light on the discreet aspects of widely expected FDI in organised multi-brand retail in India and its effects on Indian retailers.

In an interview with Rakesh Neelakandan of Commodity Online, he is upbeat on the prospects of Indian retail firms even as he adds, “We have to evolve a lot, not just in terms of hardware but humanware, before we can think of a large scale adoption (of models by Indian retailers).”

Sinha has been the Chairperson of the Centre for Retailing at IIMA and is a faculty in the area of marketing and retailing. He teaches Retailing and Marketing Management to post graduate students and also offers courses on Marketing Management and Consumer Behaviour to the Ph.D. students.

Excerpts:

Commodity Online: What are the possible M&A scenarios that you see once FDI in multi brand retailing is allowed for?

Piyush Kumar Sinha: Retail industry, like many others, has seen consolidation. These are part of an industry phenomenon and retail is no exception. India has a unique distinction of its largest marketcap companies operating in the retail sector. I would not be surprised that many foreign retailers may be worried that they may be bought over by Indian retailers as most of these large Indian retailers are already global in their business operations.

CO: There is the relationship aspect connected with the so-called kirana-stores (mom-and-pop stores) when it comes to customers, that make them virtually invincible. Will it be possible for Wal-Mart to replicate the model? (Starbucks has done that, although in a different arena.) Is a coupling of ideas possible that would work out for India?

PKS: We must understand that small store have not been obliterated and would never be. The reason is simple. Their business model is very different from a large format store. Even a developed country like Japan is full of small stores. It would be difficult for retailers like Wal-Mart to replicate the small store model.

CO: Regarding the not-so-affluent middleclass: They may shy away from the Wal-Mart ambience, given its relative flamboyance. Will firms like Wal-Mart have to tone down their ambience in India?

PKS: There is no need to tone down anything for the fear of customer shying away. Retailers like Hariyali Kisan Stores, Chaupal Sagar and Aadhar have demonstrated this even in the rural areas customers are ready to adopt new levels of service deliveries.

CO: Is there any marked difference in the functioning of India based retail chains when compared to chains like Wal-Mart when it comes to sourcing and other activities?

PKS: Indian retailers are trying to adopt models similar to those practiced by retailers like Wal-Mart and Tesco. Their business is dependent on efficiencies that require attention to details. We have to evolve a lot, not just in terms of hardware but humanware, before we can think of a large scale adoption.

CO: Briefly, what ripple effects (in terms of sourcing, employment...all the way to CSR) do you expect when stores like Wal-Mart enter India by virtue of FDI?

PKS: The effects (are) already being seen. The response of kiranas and improvements of service levels in the industry across towns and segments are indicative of this.Why do we forget that these retailers are already present in the country. The current FDI policy change would only enhance their stake. They have been sourcing since long. The whole area of supply chain (logistics, warehousing, transport, wholesaling) have been open since long. But we have not received the response from foreign investors so far.

CO: Could you please tell us about the technology that is employed in this kind of business? Will the entry of these foreign retail chains help Indian IT industry with orders for customised solutions?

PKS: Indian retailers already using the best-in-class technologies. In some cases, they are ahead of their foreign counterparts.

CO: What are the likely challenges that firms like Walmart would face once they enter India? How could they be tackled? What would be their challenges in real-estate sector and setting up of allied infrastructure?

PKS: Everyone is hoping for the best. But, if you notice, the real estate industry did not have to wait for foreign retailers. Indian retailers themselves have enough money for this purpose.

CO: Given that local knowledge is mandatory for these global chains, how would they gather the same in India? What could be the possible challenges?

PKS: That only a few retailers are truly global in their business proves this point. It requires a huge effort. You may note that in many emerging economies, local retailers are bigger than the MNCs.

CO: Regarding man-power requirement and skill development: Can we expect a Wal-Mart Training Centre?

PKS: Some retailers are already in this process.

CO: How deep do these firms have to engage farmers? How will they reach them, and more importantly, communicate and ultimately convince?

PKS: Please check out if, in other countries, it has been the retailers or some other entities who have agglomerated from the farmers on behalf of retailers.

As published in: http://www.commodityonline.com/news/FDI-in-retail-Prospects-of-Indian-retailers-taking-over-foreign-41820-3-1.html

Interview:-Early birds profit from commodity markets

It is always a profound experience to listen to a seasoned player in commodities, to know from him, the common mistakes that ordinary people make when it comes to commodity investments. It is also relieving, when the same person paints a glass-half-full picture of global macroeconomic scenario.

In a brief interview with Rakesh Neelakandan of Commodity Online, C.P Krishnan, Wholetime Director, Geojit Comtrade Ltd. wards off the notion that there is a bubble existing in the commodity markets.

Commodity Online: How can one profit from commodity markets?

C.P Krishnan: People who have patience, people who do research and invest, profit! Ordinary man will be attracted to investment options only at the end of a rally. Early birds profit. A hypothetical example could be this: If someone buys crude at $110, he may stand to lose as prices can fall. But those who bought crude at $85 stands to profit.

CO: But we can educate investors...

CPK: We may be able to give investor education. But, people may not abide by advice, always as decision making is with the person who invests. If you are shaky person it may not be helpful.

Sometimes you get easy money. But it is more of an exception rather than example. Markets are the reflection of human psychology. If a commodity goes up, it simply means a lot of people are thinking that prices can be going up.

Big players may even choose to stay invested because they do not want the prices to come down!

CO: What drives the markets?

CPK: Two things: fear and greed! When the commodities go up, people want the same to go up like anything. When the commodities come down, people want prices to come down, so that, they can buy in dips. In either case, people may stand to lose as things cannot go up or come down for ever.

And, when the prices come down a tad low, people who have invested sell because of fears, and end up with a loss; only to see prices gaining later on.

CO: Coming to recession; do you think recessionary phase is over?

CPK: Recession started off in 2008. But it has not ended and is still continuing. Stimulus packages were announced and to a certain extent recession was contained. But Europe and America are reeling under recession even now and the worst is not over.

But India has remained secluded and we can be considered very lucky. The repercussions of recession were felt across the equity markets and the commodity markets. But bullion commodities have benefitted out of the same.

CO: Had you seen this recession coming? Did you have any clues then?

CPK: No. We were not feeling it coming. But we had been very cautious. The Crude Oil prices were going up. We felt it to be unsustainable. Investment banks were pulling up the markets.

Interesting enough, when the crude oil prices sky rocketed to $145, in India, prices were still ruling low at a rate 40% lower. Afterwards, the prices went up. This was when the markets eased and government decided to contain the price burden.

In my personal opinion, the government has kept the rupee low to help exporters. China is doing the same thing. Dollar is very weak. Nobody wants their currency to appreciate. Rupee should have been at Rs.40 a dollar or less.

CO: How do you relate inflation and commodity price rise?

CPK: Inflation is not due to high commodity prices. There is this mismanagement of logistics and there are supply bottle necks. I am not attributing inflation to commodity prices alone. Transportation has become costlier.

There has been good production in agri-commodities. But with improved warehousing facilities and information, the farmers are holding back commodities.

There is no magic formula to rein-in inflation. If the oil prices come below $85, inflation can be reined in. But it may not happen soon.

CO: Is there a commodity bubble?

CPK: No. Production is high and there is reasonable demand. People are additionally stocking as well, driving prices up.

As published in: http://www.commodityonline.com/news/%E2%80%98Early-birds-profit-from-commodity-markets-40853-3-1.html

Cardamom: Climate variability, not climate change responsible for higher yields

Time of publishing:20 June 2011 at 12:35 IST
KOCHI (Commodity Online): Cardamom Hill Reserve (CHR) in Kerala has been experiencing a burst in cardamom yield, which a research study in an international journal attributed to climate change.

However, ‘climate variability’ rather than climate change may be behind the yield increases, according to Prasada Rao, Ph.D, Special Officer; Academy of Climate Change Education and Research (ACCER), a venture of Kerala Agriculture University.

What is climate variability?

“Climate variability is short-term while climate change is long term. Climate change is referred to as any significant change in climatic parameters like temperature and rain fall in any given period with reference to long period averages: the thirty years between 1961 and 1990.”; said Prasada Rao.

“Climate variability is a short-term change; may be seasonal, may be annual... “. Short-term climatic changes that do not exceed 30 year average are referred to as climate variability.

Recently, The New Indian Express (June 17,2011) report cited a study as saying “climate change is helping to increase the yield of cardamom crops at Cardamom Hills in Idukki.”

“It is a catchy title...” Prasad Rao said referring to the story headline.

“When it comes to impact side, there are so many sectors impacted by the climate change. This is where the terminology is loosely employed...” Prasada Rao said.

Intergovernmental Panel on Climate Change (IPCC) considers the base period for climate change studies as spanning between 1961 and 1990: a thirty year term.

“Any deviation from this is considered to be climate change...” he clarified.

But for the change to be measured, the base year should be comparable to another period, which again should be thirty years, he said.

If that be the case, to measure the climate change, one has to take the period extending from 1991 to 2020. That means we are almost a decade away from measuring climate change.

(Climate change effect on crops can also be measured by effectively comparing two slices of 30-year-periods, which Prasad Rao carried out in case of coconuts.)

The media report on cardamom yields and climate change cited the research study by a group of scientists. It was carried out by analysing data that falls between 1990 and 2007. Since the research study in the report was carried out by analysing 17 year data, it actually speaks of climate variability and not climate change.

As published in: http://www.commodityonline.com/news/Cardamom-Climate-variability-not-climate-change-responsible-for-higher-yields-40085-3-1.html

Interview:- India requires a Ministry for Climate Change: Prasada Rao

When Gondi Sri Lakshmi Hari Vara Prasada Rao submitted his Ph.D. thesis in 1970’s, there were references to climate change in it. “At that time, I was laughing with in me...climate change...Nobody had heard of it, let alone referred to it.”

Now after four decades, GSLHV Prasada Rao Ph.D is the Special Officer, Academy of Climate Change Education and Research (ACCER) one of the bright spots in the fight against climate change. ACCER is run by the Kerala Agriculture University in South India.

In a chat with Rakesh Neelakandan of Commodity Online, Rao expressed the view that India requires a Ministry for Climate Change. He spoke about how climate variability and not climate change is affecting crops, how climate change effects can be mitigated by small but concrete steps in crop management among many other things. Excerpts:

CO: Can the terms climate change and global warming used interchangeably?

PR: First of all, it is global warming and climate change and not climate change and global warming. Because of global warming there is likely to be changes in weather systems. Once it is there for a long-term, it is climate change.

CO: How climate change affects crops and crop prices?

PR: Climate change is having indirect effect on crops. It is not the climate change that affects crops. It is climate variability. Climate variability is short-term while climate change is long term. Climate change is referred to as any significant change in climatic parameters like temperature and rain fall in any given period with reference to long period averages: the thirty years between 1961 and 1990(which is fixed by the IPCC).

But, climate variability is a short-term change; may be seasonal, may be annual. It can prove to be more dangerous to crops.

We may conclude that climate change is fuelling climate variability affecting the crops which in turn affect the prices.

CO: So what keep the scientists occupied...?

PR: Global warming is likely to impact the atmospheric process. That keeps the scientists worried. Whether the one degree Celsius rise is likely to change the atmospheric process in terms of monsoon uncertainties, heavy cyclones, floods, droughts, heat waves, cold waves, cloud bursts...scientists are worried about them.

Additionally, the frequency of the ravages is likely to increase according to climate model outputs.

CO: How modelling is employed in climate change studies?

PR: Impact analysis of climate change on crops is done through modelling. The parameters in the form of increase in temperature, increase in carbon-di-oxide etc. are provided as inputs into the models. It is a simulation exercise.

When there is increase in temperature, increase in CO2 levels beyond certain optimum levels, they are likely to have adverse effects. This is generally projected as decline in yields. This is irrespective of temperate or tropical regions.

But, because of climate change, if one speaks of crops, that is a question mark. After all, it is modelling only.

CO: How can we mitigate the effects of climate change?

PR: In 2004, due to hydrological drought, black pepper vines in Wayanad were wiped out. There was no water in the rivers, so the farmers could not irrigate. Temperature was high.

But if the combination of black pepper and coffee were employed, it could have withstood the adverse effects of climate change; as coffee would have. It is a traditional practise. Not something new.

If there are proper water outlet systems in paddy fields, it could, in one way save the paddy fields as unexpected rains arrive. These are some simple measures, but can bring huge changes. For instance, managing the timely availability of machines employed in harvesting...

In kharif season, the temperature cannot go beyond 30 degree Celsius. That being the case, paddy can tolerate 34 or even 40 degree Celsius of temperature rise. But the fields have to be irrigated properly. Technology is to be employed.

CO: Is climate change something new? How humans affect climate change?

PR: No. Climate change is a cyclical activity. It is something natural. But it happens once in a while, once in 0.1 million years or so; of which we cannot predict. But after 1998, the planet was spotted warming continuously, the rate of which is unprecedented. So, global warming is deemed human induced.

CO: Is climate change a hoax?

PR: That is not correct, not at all correct. There are more than 2500 scientists across the world. And climate change’s effects are studied throughout the world. When it comes to the definition of climate change, there is unanimity. So, climate change is well defined...global warming is real...polar ice is melting. The IPCC has said this.

CO: What the governments can do about climate change?

PR: Climate change affects a whole gamut of sectors. Climate change affects human health, it affects, animals, it affects agriculture. So, there should be a ministry for it: a ministry of climate change. There should also be more studies carried out in the topic.

And for that, in addition to policy response, we need more Human Resources.

MSc. Integrated Climate Change Adaptation is our response to climate change. An integrated five year programme, it offers electives in agriculture, veterinary and animal sciences, fisheries, forestry, biodiversity, water resources and health. The course is the first-of-its-kind in Asia.

The course is being initiated at the Kerala Agriculture University and would provide students the capability to make recommendations on future adaptation and mitigation strategies.

As published in: http://www.commodityonline.com/news/India-requires-a-Ministry-for-Climate-Change-Prasada-Rao-40096-3-1.html

Interview:- India is a superpower in oils & spices oleoresins: Mathew Attokaran

India is a major player in Spices commodities and within the ambit of the spice industry comes the segment of value-added spices including Spice extracts. The industry survived the downturn of 2008 and seems to be least affected by the same, endorses renowned food technologist Mathew Attokaran.

Mathew Attokaran (formerly A.G.Mathew) is the Technical Director of Plant Lipids which is a major producer of Essential Oils, Spice Oleoresins and Natural Food Colours.

He has an illustrious career behind him: A doctorate in Food & Flavour Chemistry, he has carried out research in food science and technology in CFTRI (Central Food Technology Research Institute) Mysore and RRL (Regional Research Laboratory), Thiruvananthapuram. He has juggled many a hat with the United Nations agencies like FAO (Food and Agricultural Organisation), UNIDO (The United Nations Industrial Development Organisation) and International Trade Centre of the UN and has also worked for WTO (World Trade Organisation).

Two books to his credit, his latest—Natural Food Flavors and Colorants—has been published by Wiley-Blackwell.

In a chat with Rakesh Neelakandan of Commodity Online, he asserted that India is a world superpower in oleoresins.

Excerpts from the interview:

Commodity Online: Global recession is known to have affected the food industry in the developed markets as the consumption patterns have changed there; including in the ready-to-eat segment. How this has affected markets for essential oils, spice oleoresins and natural food colours?

Mathew Attokaran: Food industry was least affected by the downturn; in fact there were reports that the industry managed to gain some growth during the phase. This has happened in earlier recessions too.

After all, people may trim some of their luxuries in the course of recession. They may postpone certain purchase decisions of consumer durables like television. But when it comes to food, people may not be that adamant. After all you should have some amount of luxury!

Secondly, flavours are added in small quantities in food items. So their contribution to food cost is not of a big degree.

That said, we experienced a slight setback initially. But, with overseas importers finding the initial crunch in demand waning, opted to airlift certain oleoresins, later into the months!

CO: How the boom in the BRICS nations has helped your business?

MA: Twenty years back, US was the main market for spice extracts, along with Western Europe—especially Germany, France and England—as well as Japan, South Korea and Oceania (Australia and New Zealand). But in the last 10 years, South America (Brazil), East Europe (Russia) and Asia (India, China) also has good market for extracts.

This is an encouraging trend, because we are also seeing demand from Argentina and certain other Latin American countries gaining momentum. The trend is also visible in Thailand, Indonesia etc.

CO: Artificial flavours, if used according to scientific guidance are harmless. Given they are relatively cheap, how does your industry work out the economics?

MA: ‘Natural’ has become very important. Supply shortages exist for natural extracts. But there is a craze for things that are natural. The market for artificial flavours may disappear as years pass by and can become feeble.

CO: Post FSSA how the Indian value-added spice industry perceived in foreign nations; especially US and Europe?

MA: With the FSSA (Food Safety and Standards Authority) coming into being, we expect to get better quality raw materials from growers. Regarding the perception, I think, yes, India would be seen in a better light.

CO: There are many players in the industry of value added spices in India. How innovative is this industry? Where does Plant Lipids stand in terms of innovation?

MA: I would say 90% of the global spice extract business is located in India. Our nation is a world superpower when it comes to oleoresins. China is giving us some competition and is a potential threat, but the climatic conditions favour us buy a huge degree.

This super power status has a backbone in advanced research carried out by CFTRI and RRL.

For instance, there are other countries like Indonesia and Vietnam where spices are grown. But why are those nations lagging in this arena? It is the absence of research that hampers them...

But in the arena of citrus flavours (added in cool drinks), the nation lags behind. It has to be noted that the entire citrus oil industry is bigger than spice extraction industry.

In case of other beverage flavours too, India has a long way to go.

CO: What are the major challenges that you have faced in research and industry?

MA: We find it challenging to deal with pesticide residues in extraction. Growers are now increasingly aware of the presence of pesticides in spices; thanks to the efforts of Spices Board. After all, challenges make your day...

As published in: http://www.commodityonline.com/news/India-is-a-superpower-in-oils--spices-oleoresins-Mathew-Attokaran-39982-3-1.html

Interview:- Dr.K.A. Ratheesh, CMD, Kerala State Cashew Development Corporation (KSCDC)

Kerala State Cashew Development Corporation (KSCDC) stands as an exception in the flippant imagery of loss making public sector initiatives. The corporation has broken all the rules in cashew production, processing and export, proving that unbelievable things can happen in the drudgery of such initiatives.

Now, with a turn over exceeding Rs.175 crore, 20,000 workers and 30 factories, the corporation is going places with Gulf, Middle-east and North Africa in its marketing agenda. And if everything goes well, it can even munch the market share for cashews in Russia and China in a while.

Sufficient management will-power and acumen can create turn around stories is the testimonial message that KSCDC has to give.

The architect of this turnaround story-- Dr.K.A. Ratheesh, CMD, KSCDC--speaks to Rakesh Neelakandan of Commodity Online about the future plans and the limitless skies that KSCDC intends to chart. Excerpts:

Currently KSCDC has a single brand and four products under the umbrella CDC Cashews. When can we expect new products, and what would they be?

We have entrusted the Central Food Technology Research Institute to come up with additional products, and cashew noodles and chocolate-coated cashews are in the laboratory. It has been noticed that cashew noodles face the problem of brittleness which the researchers are trying hard to address. Since the products are under developmental phase, it is too early to say anything more about them.

We have asked CFTRI to come up with products in a year. The research, of course is funded by KSCDC.

In 2008, KSCDC entered the Gulf market. Which product did KSCDC launch in 2008? Did KSCDC have any campaigns in place then?

In 2008, we launched Cashew Soup, Cashew Powder (a spice mixture for cooking), Cashew Vita (health drink) and Cashew Bits in the Gulf market. That was a test. Finding healthy response, we have tied up with the EMKE group to market the products.

We understand that KSCDC have launched a new campaign in Dubai following the success of products in Gulf. What is the theme of campaign? What is the medium of campaign?

As of now, we are having no campaigns in place and there are no promotionals, though we are facing stiff competition from countries like Vietnam and Barzil. Even cashew products arrive from Germany with the label,”packed in Germany”.

The productivity of Vietnamese cashew sector is worth mentioning.

80% of KSCDC production is exported with USA being the largest export destination. Which are the other major destinations?

India is the biggest producer, processor, exporter and consumer of cashew kernels in the world. Though it can be argued that 80% is exported; in reality, only 50% is exported with the rest being consumed here.

We face certain problems while we export to US and UK…

Please elaborate…

The US retailers like Walmart procure cashew kernels (unbranded) from us, pack it and sell it as their own. They off take it for some Rs.250 for a pack and sell it for around Rs.1000.

But, when we approach them with branded, value-added products, they raise various technical issues. Corporate lobbying is really strong there and we are at a disadvantage.

Hence, we have requested central government backing in this regard. Additional financial backing is also requested to promote the brand.

What are KSCDC’s plans for the domestic market? How are the four marketing establishments in four regions of the country performing?

We are having low market penetration levels in the domestic market.

The retail chains are having certain procurement policies involving 30-60 days of credit windows. Being a government organization, we have certain limitations in towing this line. But requirement exists in the domestic market.

We also have to find ways to create customer awareness especially with regard to the health benefits that cashew gives. The State government support has been encouraging in this regard, contributing funds to brand development.

When will KSCDC start exporting to China and Russia?

We face various issues there. Especially tariff issues in China. Countries like Vietnam can export cashew on zero duty, where as we cannot. Hence, we are eyeing Hong Kong as a gate way to China. Various discussions are being held in the regard and they are progressing.

The banking sector in Russia is unorganized and that has created problems. We have difficulties in securing Letter of Credit and transfer funds.

As published in:http://www.commodityonline.com/news/Poor-overseas-corporate-lobbying-puts-Indias-branded-cashews-on-backfoot-36473-3-1.html