1/ You worked nine years with Cargill, one year with Olam and have been with McDonald Pelz for nearly ten years. Could you tell me about the company?
McDonald Pelz is the world’s largest agricultural brokerage house with offices in ten countries. We cover the supply chain from the farm gate to the consumer, focusing on soybeans, grains, pulses, and oil seeds. The company sees a significant opportunity to connect India to the world market.
In addition to being a physical commodity broker, we act as an information provider. We do crop surveys and economic and market analyses on a subscription basis. If a client wants a specific report on a particular supply chain, we do that on a paid consultancy basis.
2/ What are the issues in India regarding the domestic production of grains and oil seeds?
India has 100 million farmers with an average landholding of 1.43 hectares. Ours is a weather-dependent agriculture system where a slight change in weather leads to a significant spike in local prices. India is the last country in the Northern Hemisphere to plant and harvest wheat. Small temperature changes make a substantial change in wheat production.
Supply is fragmented, and the opportunity to increase production is limited.
3/ How will rising incomes affect food demand?
Average per capita income is around $2,200; we expect it to increase to $5,000 in the next ten years.
In 2008, China’s per capita income was $2,200 per year, and the country imported around 30 million mt of beans. Today, their per capita income is around $14,000, and the country imports around 100 million mt of beans. There is a good correlation between bean imports and per capita incomes.
In contrast, India’s population is 20 per cent Muslim and 80 per cent Hindu. We don’t eat beef or pork. Poultry and pulses will drive the expected 6 to 8 per cent annual growth in protein consumption.
India produces 25 million mt and imports 3 to 4 million mt of pulses annually. The country will become an even more dominant player in pulses worldwide.
We saw a shift from wheat to rice in China as incomes grew. Still, I don’t expect to see the same in India. North India and the central part of the country dominate wheat consumption, while rice is consumed in the coastal areas. I don’t see these preferences changing. I do see a shift from a cereal-based diet to a protein-based diet.
The government will continue to play a role. Imagine you are prime minister of a country with 1.4 billion people and 900 million living in villages with an income of less than $5 a day. India is a democratic country with a free media. A small change in food prices can become a big political issue.
The government must ensure the rural economy’s health by offering farmers high prices and keeping consumer inflation low. It has a thin line to tread.
4/ What is the status of India’s ethanol programme?
The country has a 20 per cent blending target by 2025, but I doubt we will achieve it. We need around 12 billion litres of ethanol to meet our current 12 per cent blending target. Out of that, 50 per cent comes from sugar and 50 per cent from grains. We now use around 15 million mt of grains for ethanol.
In a country like India, the fuel versus food debate will always tend towards food. The government introduced this ethanol policy when we had huge surpluses of wheat and rice. Rising ethanol demand will put pressure on the grain supply. We have imported almost half a million mt of corn this year—a record. In an average year, we are an exporter.
I don’t see the current ethanol policy as sustainable, and I expect the government to eventually say that ethanol can only be made from sugar cane.
5/ What messages will you deliver to the GrainCom24 conference in Geneva?
Probably too many.
One: India’s time has come on the world stage. People are still focusing too much on China, and I fear that they may miss the once-in-a-lifetime opportunity that India provides.
Two: South Asia’s agricultural consumption will thrive. It will increasingly tie the region’s two billion people into the world supply chain and significantly impact global trade flows.
Today India imports around 18 million mt of vegetable oil – 80 million mt of bean equivalent. China imports 100 million mt of beans. What would happen to South America’s oil sector if India stopped importing oil and imported beans instead?
India has already had a considerable impact on world agricultural flows. It has not been as pronounced as China’s, but it will grow.
Three: Do not look at India solely as a trading hub but as a country where you can connect and invest. Our food processing industry will grow in leaps and bounds, with immense investment opportunities in processing, branding, and the entire supply chain.
Four: Don’t expect immediate results. Look at a typical horizon of 3 to 5 years.
Five: Government intervention will stay high. They must care for both farmers and consumers. Still, there are opportunities within those constraints. India is a private enterprise success story. The government will always be there, but not as a direct participant.
Six: India is a democratic country with a rule of law. Even without a local language, you can cover the length and breadth of the entire country.
Seven: Act internationally but think locally. When McDonald’s came to India, they had to change their menu to suit Indian tastes. You must do the same.
© Commodity Conversations ® 2024
