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India’s farm trade may rebound in second half of 2020: Fitch Solutions

This will be the case for palm oil imports that have been almost 40 per cent lower year-on-year over January-April.

PTI | New Delhi |

The country’s farm trade, which was disrupted during the COVID-19 lockdown due to logistic issues in March-June, is expected to rebound in the second half of the calendar year 2020, said analytics firm Fitch Solutions in its latest report.

The central government imposed a strict nationwide lockdown from March 25 to April 30, and then a partial lockdown in May to prevent the spread of coronavirus.

“These measures were eased in phases from June 8 despite a continued surge in domestic COVID-19 infections, in order to protect livelihoods. We note that some states will remain in lockdown beyond May, which will continue to disrupt the economy and agribusiness operations,” it said.

Stating that the farm trade was greatly disrupted during the lockdown due to logistic issues, Fitch Solutions said both exports (rice, sugar) and imports (palm oil) collapsed over March-June.

“We forecast trade to rebound strongly in H2 (second half) of 2020, but total trade volumes over 2020 will be in line or below 2019 levels due to the scale of the decline recorded in H1 (first half) of 2020,” it said.

This will be the case for palm oil imports that have been almost 40 per cent lower year-on-year over January-April.

“We expect demand to recover strongly in H2 of 2020 (due to low stocks and low international prices), but total imports over the year are likely to be lower than in 2019,” it added.

Stating that India’s agribusiness sector is being significantly impacted by the ongoing COVID-19 pandemic, Fitch Solutions said that although farm work and port operations were deemed essential services and were allowed to continue operating under the lockdown, the disruptions to transport and labour availability impacted agribusiness production.

Labour shortages partly a result of many migrant workers heading back to their home villages to look for subsistence likely constrained some plantings. However, it added that it was difficult at the time of the report to have an accurate picture of the scale of the farm disruptions.

“These disruptions pose downside risks to our 2020/21 production forecasts for rice, sugar and coffee production, in particular if individual states’ lockdown measures drag on or if a nationwide lockdown is reinstated,” it noted.

The 2020-21 wheat crop was harvested before the lockdown started and India recorded a record crop, along with the 2019-20 sugar crop.

Stating that the dairy and livestock production sectors will be significantly impacted, the report said it is reported that transport of livestock was restricted or became extremely complicated, while meat slaughterhouses shut down as some trading companies said that they were not considered an ‘essential service’ that were allowed to operate during lockdown.

Small meat producers are struggling as they are unable to sell their products at a time when feed prices are rising due to transport disruptions, which will push many of them out of business in 2020.

“We now forecast meat production to decline in 2020 and see further downside risks to our forecasts,” it said, noting that COVID-19 adds to the key structural challenges India’s beef industry was already facing prior to the pandemic.

The significant disruptions to meat production recorded in the US and Brazil (with meat processing plants closing down due to COVID-19) could bode well for international demand of India’s beef, it said.

Moreover, lower purchasing power globally due to the impact of the pandemic on economic growth should also boost demand for lower-quality and cheap Indian beef meat in 2020, in particular from developing countries in Southeast Asia, the Middle East and Africa, it added.

“However, we believe that total meat consumption in these markets will decline due to the economic recession. As a result, India is unlikely to see a sharp increase in beef exports in 2020,” it said.

With regard to the dairy sector, Fitch Solutions said milk supply to consumers across India has been relatively smooth, unlike perishables such as fruit and vegetables, which witnessed recurrent price volatility.

Although cooperatives and milk producers under their network seem to be operating relatively normally, the report said producers out of their remit are struggling as they are unable to sell their products at a time when feed prices are rising due to transport disruptions.