Coronavirus: Way forward for Agricultural Commodities Market in India

Year 2020 has so far been a painful year for entire world in terms of loss to human life and economic loss to the countries due to Pandemic COVID-19. Every human is scared of the Coronavirus these days.

On the one hand, science is struggling to find a solution to contain the Pandemic Covid-19, on the other a large number of Economies are incurring huge losses due to lockdown as movement is restricted and only essential services are allowed to operate.

Financial Markets across the globe have seen a sharp correction due to increased risk under prevailing uncertain environment.

There are a lot of pessimism with regard to the Economic growth at the global level as there is fear of recession.  We believe that the recovery in global markets would vary from country to country depending upon the severity effect of the COVID-19. The policy measure taken by the various government will decide the growth trajectory of their countries.

India: Way Forward for Agricultural Commodities Sector

Fortunately, Indian is largely a consumer economy. How demand will improve and what steps Indian government takes to create and sustain demand in near future will guide the market sentiments and country’s growth story.

As on March 07, 2020, so far the loss to human life and number of case of Corona virus patients is not too much alarming India is successfully managing the situation.

India fortunately is having abundant food grains in its stock. Thus, it is not worried about the food inflation as of now. New Rabi season crop is ready to be harvested however due to lock down, the harvesting process is delayed.

Government is making every effort that Agri Markets (Mandis) are to be allowed to operate smoothly so that farmers produce starts available for sale to the bulk buyers keeping all the precautionary steps of maintain social distancing. Currently harvesting of big crops like Wheat, Chickpea (Gram/Chana) and Mustard seed is underway apart from other crops.

Unavailability of Agricultural Labour for harvesting and market operations due to its migration to their native places during Lockdown period remains a big challenge for the government.

Logistics and Transport related problems are also there as the Machineries required for the harvesting are stuck at places and it will take them time to reach at the required places.

Each day crores of rupees are required to purchase bulk agri commodities which arrives in the agri markets i.e. Mandis. It is to be seen how bulk buyers manage to arrange this huge amount of money to purchase the crop produce under uncertain economic environment. At the same time, how lending institutions are willing to provide them credit facility.

Thus, maintaining flow of money would remain a challenge under current situation. If adequate credit facility is not provided, the impact may be seen on the farm prices as Government procurement quantity remains limited.

Demand Prospects:

Early trend in the export of the Indian agricultural commodities like Pulses, Spices, dairy products, oil meals, poultry products and Rice have shown declining trend (Jan 20 over Dec 19). Under current scenario, it seems that Feb and March data might also be discouraging on export front.  The short term domestic demand has also curtailed.

However, we believe that while expenditure on non-essential items might remain restricted in short to medium term by the consumers, the food demand would continue to remain there. Rather, it will increase in time to come.

Thus, increased food item demand will continue to support the agricultural and allied sector even in the pessimistic scenario of the other sector in India.

Internet based services and sectors are the sectors which are comparatively less affected due to Lockdown. Paralysis in the economic activities due to Lockdown clearly reflect that this is high time to make sea changes in the Indian Agricultural sector and make most of the services available through e-based platform be it procurement/warehousing/selling/buying etc.

However, India started e-NAM (electronic- National Agricultural Market) few years for making procurement based activities through online platform. Although, it is yet to become more popular among the farmers and traders. Similarly warehouse based sales and other operations are yet to gather attention by the market participants.

It is suggested that whole agricultural value chain operations should be made ON-LINE to make it more effective to address the unprecedented and unpredictable challenges like Pandemic Covid-19.