Atul Chaturvedi Of Shree Renuka Sugars Says Crops Could ‘Seriously Suffer' Because Of Rainfall Deficit

The weather has played a spoilt sport in India this year, driving up food prices and affecting crops. While tomatoes and onions have been in the news, there is another crop that poor rainfall has affected — sugar. 

Shares of sugar companies surged up to 10% in India in light of the world’s largest sugar trader expecting a sixth year of shortages because of poor monsoons in India. India is the world’s second largest exporter of sugar. While sugar prices surged to a six-year high on Tuesday, Swiss trading house Alvean has predicted a global sugar deficit for the sixth consecutive year, owing to poor rains in India. 

Atul Chaturvedi, executive chairman of Shree Renuka Sugars Limited and chairman of the Asian Palm Oil Alliance told The Core that India could face potential problems in sugar production this year, owing to a rainfall deficit in key areas.

This comes weeks after Reuters reported that the government could put a stop to sugar exports in the upcoming season in October. 

“As far as Uttar Pradesh is concerned…the rains have been just right,” Chaturvedi said. “The problem areas this year are going to be Karnataka and Maharashtra, because August rains have actually not been perfect…our crop numbers could seriously suffer and I won't be surprised if we shave off a couple of million tons from the productions there that we normally have,” he added. 

Poor monsoons also drove up food prices. India’s retail inflation in July, at 7.44%, was the highest since May 2022, spurred by rising food prices. The consumer food price index rose to 11.51% in July, from 4.49% in the previous month. 

The one thing keeping overall food inflation down was the price of edible oils which dropped by up to 29% over the last year, as of July. But the category saw some disturbances. The country’s edible oil imports rose by 5% to a record 1.85 million metric tons in August, according to Reuters. 

Imports have been so high that we have already hit the all-year high number of imports in August itself. India consumes ​​between 23.5 to 24 million tons of edible oil per year, of which 10 million tons is domestic while 14 million tons is imported. “And this year till August, we've already imported close to 14 million tons [with] two more months still to go. So I'm sure we will end up closer to about 16.5 or 16.75 million tons,” Chaturvedi said.  

The Core’s Govindraj Ethiraj spoke to Chaturvedi to understand why Indians are importing more edible oil, what the broader food situation in the country is like, with high prices of cereals and pulses, and how sugar production is being affected due to low rainfall.  

Here are edited excerpts from the interview: 

Why are imports of edible oil shooting up like this? 

I would say to a large extent, the media and the hype created in the media on the El Nino front has been one factor which has probably contributed big time to Indian imports shooting up. In fact, the Indian edible oil players possibly thought that there's no tomorrow and they've been importing like crazy. 

In fact, on a very rough basis, we expect that imports into the country might actually go up by about 17 to 18%. Last year, India imported about 14 million tons for the full year. And this year till August, we've already imported close to 14 million tons and two more months still to go. So I'm sure we will end up closer to about 16.5 or 16.75 million tons. And that is going to be one of the biggest import number we've ever had.

The reasons largely is that the Indian government has kept the edible oil duties very low. And Indians had suffered big time in terms of very high edible oil prices. So when the prices came down in the international market, you had a scenario that Indians thought that this is a very good time to keep buying and buying and buying with the result that you are now importing much more than what you can possibly consume.

And that is one big reason, other reason also could be that post Covid-19, I think the Indian consumption story has also bounced back big time – whether you call it as revenge consumption or increase in out of home consumption or whatever. But the fact still remains that the Indian consumption story is growing and growing big time on the strength of very low and very competitive, edible oil prices.

When you say consumption story, in this case, obviously, this is not physical goods. So people are actually eating more or cooking more?

Possibly consuming much more than what they have been consuming. In fact, earlier I’d pencil in Indian consumption at around anything between 23.5 to 24 million tons. Now, if you take 10 million tons as your domestic production and imports as about 16 or 16.5 or thereabouts, we are actually looking at availability of more than 26 million tons or 26.5 million tons.

That simply means that the consumption growth this year is actually much higher than what we had earlier anticipated. And according to some people, the consumption growth could actually be higher by 10 to 12% compared to previous years, which is a big number.

And you feel that this is really going into people's homes, this is not oil that's being imported and stored somewhere.

There could be some oil which would be going in storage as well. But it can't be this high. Maybe the storage might have gone up marginally, but it is actually getting consumed. We have definitely a much higher carry out and much higher stock for sure. But even then that's why I'm not pencilling in a 16 or 17% increase. I'm only pencilling in a 10 to 12% increase in the current year.

If you were to now look at the broader food situation, you know, we've seen most rice exports being banned except for higher value basmati rice now. Second is wheat exports which were banned last year itself. Import of pulses is going up, it has gone up quite sharply and almost doubled in the last three years and we're importing from some countries. There's a price situation, there's a demand situation which you've talked about. And then there's this whole geopolitical situation because by banning exports to those people who we are importing from, we are in a different kind of situation. How are you seeing this from both within the country as well as globally?

My take is that most of the countries are now becoming much more inward looking than what they were in the past. Banning of rice exports is a case in point, banning of wheat exports from India is a case in point, Indian consumption as far as wheat and rice is concerned may not have gone up that much.

But the impact on the prices is very sharp for the simple reason that during the Covid-19 period, India was giving something close to about 10 kgs of wheat per family, which has now been brought down to about 5 kg. So for the balance 5 kgs, they will necessarily have to go to the market to pick up. So that is going to reflect on the prices. Prices as far as cereals and wheat and rice is concerned, I don't think they've gone up too much, but obviously, these are big commodities and a little bit of a impact on these commodities sends signals across the spectrum. 

As far as pulses is concerned, toor or pigeon peas as we call has definitely been in short supply and this year's numbers as far as crops is concerned, is also not all that attractive. In fact, pulses sowing is relatively down compared to what it was last year.

To come back to the first answer that you gave, you talked about how people have started importing because of El Nino or the perceived impact of El Nino. Are you seeing all of this come together in some ways then, you know, because finally the government is concerned about food security, the festival season has kicked off and obviously demand will increase. Are things happening which perhaps they wouldn't have been, were it not for this heightened sense of maybe insecurity or food insecurity to be specific?

Definitely there has been some impact the climate has been playing very truant. In fact, if you look at the August figures, weathermen say that it's overall down by about 32% or thereabouts. But if you honestly look - southern India is probably down by about anything between 60 to 70%. As far as our sugar belt is concerned, Maharashtra and Karnataka have hardly had rains in August. So all this is definitely going to impact as far as the availability is concerned.

But in terms of sugar, I don't see too much of a blip because India still has a reasonable surplus, edible oil we've imported big time. And, today, I think the soya crop is shaping up quite all right. And if we have some rains in September, that shouldn't be a big problem. Mustard. We had a fantastic crop. So that is also available in the system much more than what it used to be in the earlier years. So I think as far as the big commodities is concerned, we don't need to fear too much. 

Since you mentioned sugar and you are the head of a sugar company, crushing season will start in about two months time. So how are things looking for this crushing season across the country?

As far as Uttar Pradesh is concerned, it looks to be perfectly alright. The rains have been just right. So Uttar Pradesh crop is looking interesting.

The problem areas this year is going to be Karnataka and Maharashtra, because August rains have actually not been perfect and the reports coming out from the ground – is that our crop numbers could seriously suffer and I won't be surprised if we shave off a couple of million tons from the productions there which we normally have.