Surge in production of most crops; demand-supply equation driving prices
The Centre’s moves to stop domestic market prices of agri commodities from falling, be it by increasing the minimum support price (MSP), hiking import duty or levying a minimum import price (as in the case of pepper), have not been effective. While market prices do go up in a knee-jerk reaction following the news, they soon revert to earlier levels.
Sample this: The Centre imposed a 10 per cent import duty on wheat in March 2017 and doubled it to 20 per cent in November. But wheat prices have only fallen — from ?20.5/kg in February 2017 in Delhi, to ?18/kg now.
Similarly, the government has fiddled with the duty structure of gram (chickpea) twice in the last four months. In December last year, it slapped a 30 per cent import duty on chickpeas and recently doubled it to 60 per cent. But prices have only moved down. In Latur, Maharashtra, the prices have moved from ?60/kg in January last year to ?35.50/kg now.
The same is the case with pepper; while traders and re-exporters in the domestic market are fighting over the recently levied MIP (minimum import price) of ?500/kg, pepper prices have not been impacted.
The spot market price in Kochi was ?420/kg at the time of the MIP levy. It moved to ?470/kg in two weeks, but then dropped to ?430-420/kg by February. The price is around ?380-390/kg now; down from ?500/kg in July last year.
The reasons
Large carry-over stocks in many crops is one of the reasons for the price decline. In the last two years, production of some agri commodities both in the domestic and in the international market has increased significantly. For instance, wheat production in Russia has risen from 61 million tonnes in 2015-16 to 85 million tonnes in 2017-18 — a compound annual growth rate of 18 per cent. In Argentina, it rose from 11.3 million tonnes to 18 million tonnes in the same period.
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