Tuesday, May 06, 2014

Complementarity between the Republic of Soya and the Republic of Yoga

Argentina is the principal supplier of soya oil to India and will continue to be so in the future with its credential as the largest exporter of soya oil in the world. Soya is the main crop of Argentina accounting for fifty percent of its agricultural land. The country has world class facilities for soya processing, logistics and exports. Given its dependence on soya production and exports, Argentina can be called as a "Soya Republic".*

India feeds the soul of Argentines with yoga, meditation, philosophy of the "Art of Living" and faith in Sai Baba, Hare Krishna and other spiritual movements. There are several thousands of Argentines who are followers of Indian spiritual groups. An Argentine band " So what " has taken Indian spiritualism to a new level by combining it with popular music and taking it to even night clubs. They sing in Sanskrit but in the style of pop, rock, hip-hop and other trendy music genres. In between songs, they make the audience to do yoga and meditation exercises. During their performance, the night clubs serve only vegetarian food and do not allow alcohol, smoking or drugs. More on this http://latinamericanaffairs.blogspot.in/2012/05/argentine-pop-stars-sing-sanskrit.html#links

India is, therefore, expected to continue to increase imports of edible oil and pulses in the future. Argentina can be counted as a regular long term supplier. Argentina has the potential to increase the land under agriculture and has abundant water reserves. It is a global leader in innovation, research and best practices in agribusiness such as  Direct seeding ( no-till cultivation), silo bags for storage and Agriculture Process Outsourcing (APO). Argentina is the global pioneer in APO, an asset- light business model in which land is leased and all agricultural operations and equipments are outsourced ( More on APO http://businesswithlatinamerica.blogspot.in/2010/07/agriculture-process-outsourcing-by.html#links.  With these advantages, Argentina can increase production and exports to India besides its global exports. 

I call this give and take between Argentina and India as the complementarity between the Republic of Soya and the Republic of Yoga and in Spanish, "Cumplementaridad Alimentaria entre Republica de Soja y Republica de Yoga".

Argentina's exports of soya oil to India ranges between one and two billion dollars annually. Argentina also supplies India sunflower oil and pulses in small quantities. India is likely to increase the imports of these three items as well as source some more agroproducts from Argentina in future.

India's total imports of edible oil have increased from 1 million tons in 1992 to 4 million tons in 2002 and to 10 m tons in 2012. At this rate, India's imports could cross 20 million tons by 2030. Of the 10 million tons imported in 2012, palm oil accounted for 8 m tons while soya and sunflower oils were one million tons each. Palm oil is generally cheaper in comparison to the other two. But when the prices of soya and sunflower oil become competitive, their imports increase.

Argentina is the largest exporter of soy and sunflower oil in the world and has the potential to increase production and exports. India is the largest importer of edible oils in the world accounting for 14% of global trade.

India's consumption of edible oil has been steadily increasing from 6 m tons in 1992 to 10 m tons in 2002 and 17 mt in 2012. Consumption will continue to increase inevitably due to the growing population and economy as well as the middle class. The per capita consumption of edible oil is expected to increase from 14.3 kg to 20 kg by 2020. The global average of per capita consumption is 21 kg and the Chinese consumption is  22 kg..

India's domestic production of edible oil is not able to cope with the growth in consumption. India's production was 5 mt in 1992, 6 mt in 2002 and 7 mt in 2012. 

India is the largest importer of pulses in the world accounting for 50% of the global trade. In 2012, India's imports were 3.7 million tons and these are expected to increase in the coming decades. Bulk of the imports come from Canada, Australia and Myanmar. Argentina has started exporting small quantities in recent years and is keen to become a major supplier to India. India's domestic production of pulses has been stagnant for many decades and is unable to match the high rate of growth of demand.

There are no bright prospects for achieving significant growth in production of oil seeds and pulses by increasing the area of cultivation, since there is constraint of agricultural land. The agricultural area in India is decreasing due to the non-stop and rapid urbanization process. The Indian agriculture which is subject to the vagaries of monsoon, is also facing water crisis since water table is going down in states like Punjab where ground water is pumped indiscriminately for irrigation. 

The Government of India has been successful in reaching self sufficiency in the production of cereals. However, despite special programmes to increase production of oil seeds and pulses, there has been no satisfactory progress. The yield of oil seeds and pulses remain low. While Argentina produces 3 tons of soy per hectare, the yield of soy in India is just 1.1 ton per hectare. The Indian farmers with small holdings of land are not able to invest in innovation and productivity. 

Apart from imports, there is also scope for Indian companies to take stakes in Argentine agribusiness companies or form joint ventures and get direct access to production in Argentina and cut the transaction cost of traders. Some Argentine companies are equally keen for this arrangement since they also benefit from Indian capital and direct link to the market.  

Indian companies which have acquired agricultural land in African countries such as Ethiopia have not succeeded in their ventures since they do not have expertise and experience in large scale farming of thousands of hectares. The Argentine agribusiness companies, with their expertise, would be ideal partners for the Indian agribusiness ventures in Africa. 

This article is based on my extempore speech in a conference organized on the subject" Argentina and Asia –by 2030 : Strategies in agribusiness for the developing world" by the University of Buenos Aires from 7 to 9 April 2014.  

Video of the speech

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