How demand for cereals in India is changing

• A rising share of that is going not for direct human consumption, but for use in processed form (as bread, biscuits, cakes, noodles, vermicelli, flakes, pizza base, etc) or for making animal feed, starch, potable liquor and ethanol fuel.
• This is evidenced by data from official household consumption expenditure surveys (HCES).
• The National Sample Survey Office’s latest HCES report reveals a steady decline in the quantity of cereals consumed by an average person per month between 1999-2000 and 2022-23.

Cereals

• While direct household consumption has stagnated, even dipped, this isn’t so with production, which has significantly increased.
• The gap between officially estimated cereal production and HCES-based household consumption, too, has widened

Where is the excess production going?

• Part of it is getting exported, i.e. going out of the country.
• A second source of difference would be cereals consumed by households in processed form bread, biscuits, noodles, etc.
• A third source is cereal grain used for manufacture of feed or industrial starch.
• The agriculture ministry has pegged India’s maize production in 2022-23 at 38.1 mt.
• The bulk of it 90%, if not more would have been used as the primary energy ingredient in poultry, livestock and aqua feed or for wet-milling and conversion into starch, which has applications in the paper, textile, pharmaceutical, food and beverage industries.
• Feed and starch manufacturing apart, cereal grains are also fermented into alcohol (after milling and converting their starch into sucrose and simpler sugars) and further distilled into about 94% rectified/industrial spirit or 99.9% ethanol.
• In other words, cereals are today not just food and feed, but also fuel grains.

The unexplained surplus

• Adding exports of 32 mt, usage in processed food form (38 mt) and diversion for feed, starch making and fermentation purposes (50-55 mt) these are very rough estimates to direct household consumption of 150-155 mt will take the total yearly demand for cereals to 275-280 mt at best.
• That’s way below the estimated 300 mt-plus domestic cereal output. The difference is the surplus grain being mopped up by government agencies and accumulated in the Food Corporation of India’s warehouses.
• If the agriculture ministry’s cereal output estimates are right, the country is producing at least 25 mt of excess grain every year, thereby exerting downward pressure on market prices, if not adding to government stocks.
• But given the recent experience of high cereal inflation,notwithstanding ban/restrictions on exports, and depleting stocks in government warehouses, questions can be raised on the veracity of the official production estimates themselves.