Pandemic tears through India’s agriculture commodity demand; exports show resilience

India’s agriculture industry is in a wait-and-watch mode amid the worsening pandemic situation, as localised lockdowns have stagnated market demand, while any subsequent stricter restrictions in the coming days are expected to slow down trading activity and disrupt supply operations.

Even though agriculture and allied activities are exempted from government restrictions so far, several markets across India remain closed as cases continue to skyrocket. As a result, India’s domestic demand for palm oil, grains, as well as sugar is absent from the markets. India is the world’s largest buyer of palm oil, and a major consumer of grains and sugar.

India’s appetite for palm oil may get impacted as nearly 60% of country’s consumption comes from the HORECA (Hotels, Restaurants, Catering) sector, which may see some reduction in the coming days. Roughly, a countrywide lockdown for a month affects consumption of vegetable oils by 20%. 

Palm oil demand has already seen a marginal reduction due to the partial lockdowns, but vegetable oil prices in the country are high, which are likely to send more household buyers to palm oil.  As prices of oils used widely in households like sunflower, soybean, mustard and groundnut hover at historical highs, palm oil is the only discounted option available for price sensitive customers.  India imports about 8 million-9 million mt of palm oil annually.

In the benchmark grain markets of India, demand has been muted due to absent buyers or halted trading. The demand of wheat in Indore, a major trading center in the Indian state of Madhya Pradesh, has been hit as the market is shut due to the lockdown imposed by the state government.   Apart from these, logistical bottlenecks are also weighing on the demand for the commodity.

Exports of agriculture commodities from the country, however, have remained largely unaffected so far. Rice exports from India — the top rice exporter globally — surged 43.5% in value terms on the year during April 2020-March 2021, latest data from the country’s agriculture ministry showed. As for corn, harvest for the winter season crop is still undergoing in the country without any disruptions caused by the pandemic, sources said.

Lockdowns in various Indian states, including Maharashtra, have muted domestic demand for sugar. Maharashtra — India’s sugar trading hub — went under a lockdown after COVID-19 cases surged in the state.

However, export demand for sugar from the country has remained steady keeping prices stable. There is no selling pressure on the mills right now, because the export demand is steady, so mills are not lowering prices.  

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