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India Must Address Grain Storage Conundrum

India Must Address Grain Storage Conundrum

27 March 2014

INDIA – Inefficient grain trading could mean much of India continues to starve regardless of economic development or harvest yields.

Food storage limitations and supply chain inefficiency are often the root cause of many food shortages, say agricultural economists at the University of Illinois.

“It’s not just lack of water or access to the right seeds,” explained Dr Kathy Baylis.

This is according to an in-depth study conducted with fellow Illinois researcher Dr Mindy Mallory, shedding light on the dearth of grain trading opportunities for Indian farmers.

Analyzing crop trading within three Indian states, the Journal of Agribusiness paper found a major supply chain flaw in a sector on target for its biggest ever wheat harvest.

A cyclical relationship was found; there are not enough trading opportunities to make storing grain worthwhile and because grain is not kept for later months, there are advantages not being taken in the markets.

This follows agricultural reforms of 2002/3 which were meant to make grain trading easier.

“We wanted to see if there was more integration in the markets since the 2002 reforms,” said Dr Baylis. “We were surprised at how little integration we saw.”

As a result, many growers sell most of their grain at harvest. Dr Baylis blamed the lack of trading locations for this.

“There is a strong incentive to sell at harvest because if you don’t you’d have to travel to Delhi or another major city,” said Dr Baylis.

“What we found in India is that there was a huge disincentive to invest in on-farm storage because even if farmers could store their grain for six months or so, they wouldn’t be able to sell it then.”

From what Dr Baylis and Mallory understand, active grain traders do exist, proliferating in specific regions.

These areas see sellers benefit from the marketing opportunities.

“They aren't stuck looking at their own local market,” explained Dr Baylis. “If they work with a trader, they can keep an eye on what’s happening in the city and sell their grain two or three months after harvest.”

But, just like the cyclical problem suggests, the Illinois team stressed that storing a harvest, while important, still requires ‘the right policy and incentives’ to convince farmers that saving grain for a rainy day is worthwhile.

Earlier this month, the Australian Department of Agriculture research bureau (ABARES) brought the scale of India’s arable sector under the lime light when it forecast a 99 million ton wheat crop for 2014.

ABARES based the seven per cent gain on significantly more planted wheat acres and favourable sowing conditions.

Nevertheless, consumption is set to outpace domestic production.

This could be viewed as indicative of Indian agriculture’s last two decades, say two US Department of Agriculture Economists.

In an Economic Research Service (ERS) publication last month, Shard Tandon and Maurice Landes lamented India’s claim as home to the most food insecure people after significant economic strengthening.

USDA estimates have India’s food insecure population, those people under the 2,100 calorie target, at 255 million – 29.8 per cent of the population in 2010 by the Indian government’s own reckoning.

Mr Tandon and Landes added that 1 per cent of gross domestic product goes on subsidized food grains.

This means India has one of the most expensive food aid programmes in the world, costing $13.5 billion in 2012.

However, government estimates indicate a third of grains shipped to hungry homes through state funded programmes can be subject to 'leakage'. 

The article said: "Estimates of diversion—the difference in the amount of Public Distribution System rations received by states and the amount households reported that they consumed—are high, some as high as 41 per cent."

Image courtesy of Maurice R Landes USDA/ERS

Michael Priestley

Michael Priestley
News Team - Editor

Mainly production and market stories on ruminants sector. Works closely with sustainability consultants at FAI Farms.

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