Indian Agri-Commodities Markets: Overview
India is one of the top producers of agricultural commodities in the world. The Indian commodity market for agri products is as old as it is in the USA and UK.
Markets have been fluctuating from the beginning but the country is successfully stabilizing the commodity market with advanced technology and transparency.
Demand and supply dominate the commodity market. This is a market that includes trade in the primary sectors of the economy. Commodities are classified into two types in the Indian Agri-commodity market: soft commodities and hard commodities. Soft agricultural products include sugar, coffee, cocoa, wheat, and fruits. Hard commodities are usually mined, such as oil and gold. The oldest way to trade and invest in commodities is to buy or sell underlying assets at a predetermined price at a specified time in the future.
Future contracts are secured by physical assets. Trading in commodity markets can be done either directly or by derivatives using spot prices, options, forwards, and futures. To manage the risk of price fluctuations, farmers use derivative trading in the commodity market.
The Indian agri-commodity sector is witnessing huge growth; the sector is increasing its contribution in the global food trade every year due to its immense potential for value addition, particularly within the food processing industry.
The Indian food and grocery market is the sixth-largest market in the world, accounting for 70% of retail sales. The Indian food processing industry accounts for 32% of the country’s total food market, is one of the largest industries in India, and ranks fifth in terms of production, consumption, exports, and expected growth.
In the fiscal year 2021, the total agricultural products exports stood at US$41.25 billion.
Agricultural commodity market in India
The survey of the economy, India in 2020-21 stated that in the fiscal year 2020, the total food grain production in India reached 296.65 million tonnes, up by 11.44 million tonnes compared with 285.21 million tonnes in the fiscal year 2019.
The government of India has set a record of buying 42.74 million metric tonnes from the central pool in the year 2021. This is 10% more than the amount purchased in the fiscal year 2020. For FY22, the government also has set a record growth rate of 2% for farmers with 307.31 million tonnes of food grains. In FY21, 303.34 million tonnes production was recorded against the target of 301 million tonnes.
Production of horticulture (the art of cultivating plants in gardens to produce food and medicinal substances) in India reached a record 331.05 million metric tonnes (MMT) in 2020–21(as per 3rd advance estimate), an increase of 10.5 million metric tonnes over the fiscal year 2020.
India has the largest population of about 535.78 million, which is about 31% of the world’s population. The country’s milk production is expected to increase from 198 MT to 208 MT in FY21, an increase of 10% y-o-y(year to year). The area under horticulture is projected to grow by 2.7% in FY21.
According to the Indian Sugar Mills Association (ISMA), between October 2019 and May 2020, India produced 26.46 metric tonnes of sugar.
India is one of the 15 major exporters of agricultural products in the world. Agricultural exports from India reached US $ 38.54 billion in FY19 and the US $ 35.09 billion in FY20.
According to Inc42(Media House), the Agricultural sector of India is projected to grow to US$24 billion by 2025.
The share of the private sector in seed production increased from 57.28% in 2017 to 64.46% in FY21.
India is the world’s second-largest producer of rice, wheat, sugarcane, cotton, nuts, and fruits and vegetables. It also produced 25% of the world’s pulses by 2019 in the last decade.
In 2015-25, India’s organic food sector is expected to grow at a CAGR of 10%, it is expected to reach 75,000 crores (US $ 10.73 billion) by 2025 from 2,700 crores (US $ 386.32 million) in 2015.
The market for processed food in India is expected to increase by Rs. 3,451,352.5 crores (US $ 470 billion) by 2025 from Rs. 1,931,288.7 crore (US $ 263 billion) in FY20 against the backdrop of government initiatives such as planned infrastructure worth US $ 1 trillion and Pradhan Mantri Kisan Sampada Yojana. The agri-commodity processing industry employs about 1.77 million people in India, this area allows 100% FDI automatically.
Between April 2020 and February 2021, the total value of exports of processed food products was Rs. 43,798 crores (US $ 6.02 billion). India exports major processed food products such as pulses, processed vegetables, processed fruits and juices, peanuts, guar gum, cereals, milled products, alcoholic beverages, and oil meals.
Future of Agri-cultural sector in India
India is set to achieve the determined goal of doubling farm income by 2022. Increased investment in agricultural infrastructures such as irrigation facilities, warehousing, and cold storage is expected to boost India’s agricultural sector in the next few years. Moreover, increasing the use of genetically modified crops is likely to increase the income of Indian farmers. Due to early maturing varieties of pulses and an increase in the minimum base price, India is expected to become self-sufficient in pulses in the next few years.
In the next 5 years, the central government aims to invest $ 9 billion in the fisheries sector under the PM Fisheries Wealth Scheme. The government aims to increase fish production to 220 lakh tonnes by 2024-25.
Going forward, adopting food safety and quality assurance mechanisms such as ISO 9000, ISO 22000, Risk Analysis and Critical Control Point (HACCP), Good Production Practices (GMP), and Total Quality Management (TQM) with Good Hygienic Practices (GHP). The food processing industry will bring many benefits. Agricultural exports from India are expected to reach the target of US $ 60 billion by 2022.
How to buy agri-commodities in India
The easiest way of buying agri-commodities is Tradologie.com. It is a digital trade platform, you can buy the bulk of any food and agri-commodity from 45K+ verified sellers from all over the world. The best part of this platform is you don’t have to make any calls or emails. The company allows you to contact sellers directly without any intervention from the middleman.