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From The Gloss
From The Gloss
The economy of India is one of the fastest growing economies in the world. The post
independence period of India, was marked by economic policies which tried to make the
country self sufficient.
All the sectors that is food prices, crude oil, real estate, stock exchange and gold are the back
bone of the society and these sectors are indicators of economic growth. The scope of these
sectors affects each individual in the society. Any relationship among these factors may help
investors in taking better decision.
Relationship between food commodities and crude oil
The current global food system is highly fuel-and transport-dependent. Fuel will certainly
become less affordable in the near future, making the current, highly fuel-dependent
agricultural production system less secure and less affordable. It is therefore necessary to
promote food self-sufficiency and reduce the need for fuel inputs to the food system at all
levels.
The connection between food and oil is systematic, and the prices of both food and fuel has
risen and fallen more or less in the same tandem in the recent years. Modern agriculture uses
oil products to fuel farm machinery, to transport other in puts to the farm, and to transport
farm output to the ultimate consumer. Oil is often used as input in agricultural chemicals. Oil
price increases therefore put pressure on all these aspects of commercial food systems.
Bio-fuel production started approximately in 1990, but the total volume and growth was
modest. Biofuel production reached significant level in 2000 approximately, and started with
ethanol and biodiesel. Ethanol can be produced from sugarcane, sugar beetroot, wheat,
barley and corn and has represented a major part of biofuel production since 2000. Palm,
rapeseed, sunflower, soya and other vegetable oils or animal fats can be transformed in to
biodiesel. The U.S and Brazil are the main producers of ethanol , while biodiesel is produced
in the European Union.
Figure 1. World biofuel production (thousand barrels per day)
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Notes: Indices based on world prices in US Dollar. Oil Price Index is the average of WTI,
Brent, Fateh. The Food Price Index consists of Cereal, Vegetable Oils, Meat, Seafood, Sugar,
Bananas, and Oranges.
Source: IMF.
Figure 2 illustrates various relevant developments. First, food prices were subject to price
increases in the last years; there is a clear upward trend starting in 2003 or 2004. Second,
since roughly 2006 food prices have moved up and down more sharply than previously; price
volatility increased. Third, food prices apparently have developed a tendency to co-move
more with oil prices than before.
Thus there is a concern that high and volatile prices of crude oil may cause prices to continue
to increase.(Bloomberg, 2011). Moreover, oil prices rise, so does demand for bio-fuel, which
are the only non-fossil liquid fuels able to replace petroleum products in existing combustion
engine and motor vechiles. But bio-fuels are often made from corn and other agricultural
products. As the demand for these alternative fuels increases, crop prices are forced upwards,
making food even less affordable.
These data have been analyzed by applying stochastic volatility models and resorting to
Bayesian econometric analysis for the estimation of the models parameters. The same result
has been shared by Nazlioglu et al. (2013) by extending the scope of agricultural
commodities considered (wheat, corn, soybeans, and sugar) and raising their frequency to
daily prices observed over a longer sample from 01 January 1986 to 21 March 2011.
Nazlioglu et al. (2013) apply a different method which corresponds to the causality in
variance test and impulse response functions. In order to identify the impact of the food price
crisis, Nazlioglu et al. (2013) divided the data into two sub-periods: the pre-crisis period
(January 1986-31 December 2005) and the post- crisis period (01 January 200621 March
2011). Their findings mention that, with theexception of sugar, volatility spillover between
oil and agricultural markets is absent in the pre-crisis period and is confirmed during the
post-crisis period.
In fact, most of these studies highlight the significant volatility linkages between oil prices
and most food commodities prices which is deepened through biofuel sector growth (among
others: Baffes, 2007; Akram, 2009; Balcombe, 2011; Ciaian and Kancs, 2011; Busse et al.,
2011). These studies agree on the fact that oil price volatility translates into food price
volatility through two key elements. The first one corresponds to transportation costs and
fertilizer prices. The second element is related to biofuels and the expanding use of
agricultural commodities as feedstocks for biofuel production. This agreement, taken alone,
leads to think that transmission of oil price volatilities to crop prices may be more rapid.
Export- led agricultural strategies also increase the worlds vulnerability to high oil prices.
Most donor agencies have encouraged the less industralised countries to focus on the
production of cash crops at the expense of staples for local consumption. As a result, people
in these countries are forced to rely increasingly on imports of often subsidized cereals or
those funded by food aid programmes. However, rising transport cost contribute to rising
prices of food imports, making them ever less affordable. Fuel cost represents almost 50 to
60 percent of total shipping costs.
From early 2007 and in mid-2008, as the fuel prices soared, the cost of shipping food aid
climbed by about $50 per ton a nearby 30 % increase, according to United States Agency for
International Development(Garber,2008)
Meanwhile the poor farmers who cannot afford machinery, fuels and commercial farm inputs
find themselves at a disadvantage in the global food economy. Compounding this are the
agricultural policies in the industralised food exporting countries that subsidized domestic
producers and dump surpluses on to the developing countries, thus adding to the economic
disadvantage of the smallholders farmers in those countries. As a result millions of those
farmers are driven out of business annually, those countries are giving inceasing priority to
production for export and they are witnessing a landless poor urban class that is cronically
malnourished and hungry.
Soaring food and fuel prices have a disproportionate impact on developing countries and on
poor people in developed countries. Americans, who, on average, spend less than one tenth
of their income on food, are able to absorb the higher food prices more easily than the
worlds poorest 2 billion people, who spend 50 to 70 per cent of their income on food.
Why are oil prices so high? Speculative investment in commodities plays a role, though there
is a persuasive case to be made that oil prices would be rising even if oil futures speculation
were entirely curtailed. The oil industry is changing, and rapidly.
As Jeremy Gilbert, former chief petroleum engineer for BP, has put it, The current fields we
are chasing weve known about for a long time in many cases, but they were too complex,
too fractured, too difficult to chase. Now our technology and understanding [are] better,
which is a good thing, because these difficult fields are all that we have left (Gilbert, 2011).
The trends in the oil industry are clear and undisputed: exploration and production are
becoming more costly, and are giving rise to greater environmental risks, while competition
for access to new prospective regions is generating increasing geopolitical tensions.
According to the International Energy Agency, the rate of world crude oil production reached
its peak in 2006.[IEA 2010a) The IMF has joined a chorus of energy industry analysts in
concluding that scarcity and high prices are here to stay.[IMF 2011a, 2011b]
A collapse in demand for oil resulting from sharply declining global economic activity could
cause oil prices to fall, as happened in late 2008. Indeed, this is a fairly likely possibility. But
while it would make oil cheaper, it would not make fuel more affordable to most people. It is
theoretically possible for the world to curb oil demand through policies that limit
consumption, and it is also conceivable that some unexpected technological breakthrough
could rapidly result in a cheap, effective alternative to petroleum. However, these latter two
developments are rather improbable. Thus there is no likely scenario in which the services
provided by oil will become more affordable within the context of a stable global economy
at any time in the foreseeable future.
While wealthy consumers are able to absorb incremental increases in food prices, a sudden
interruption in the availability of fuel (due to geopolitical events) or a significant gradual
curtailment of fossil fuel production (due to the continuing depletion of world hydrocarbon
reserves) could lead to a breakdown of the food system at every level, from farmer to
processor to distributor to retailer and finally to consumer.
To summarize, high oil prices contribute to soaring food prices. Our modern global food
system is highly oil-dependent, but petroleum is becoming less and less affordable. Extreme
weather events also contribute to high food prices, and, to the extent that such events result
from anthropogenic global warming, they are also ultimately fuel-related. Thus there is no
solution for the worlds worsening food crisis within current energy and agricultural systems.
What is needed is a major redesigning of both food and energy systems. The goal of
managers of the global food system should be to reduce its dependence on fossil energy
inputs while also reducing GHG emissions from land-use activities. Achieving this goal will
require increasing local food self-sufficiency and promoting less fuel- and petrochemicalintensive methods of production.
Given the degree to which the modern food system has become dependent on fossil fuels,
many proposals for delinking food and fossil fuels may seem radical. However, efforts to this
end must be judged not by the degree to which they support the existing imperatives of the
global food system, but by their ability to solve the fundamental challenge that faces us the
need to feed a global population of seven billion (and counting) with a diminishing supply of
fuels available to fertilize, plough and irrigate fields, and to harvest and transport crops.
Farmers need to reduce their dependence on fossil fuels in order to build resilience against
future resource scarcity and price volatility.
In general, farmers can no longer assume that products derived from petroleum and natural
gas (chiefly diesel, gasoline, synthetic fertilizers, and synthetic pesticides) will remain
affordable in the future, and they should therefore change their business plans accordingly.
While many approaches could be explored, which in any case would depend on specific
geographic locations, the necessary outlines of a general transition strategy are already clear.
Farmers should move towards regenerative fertility systems that build humus and sequester
carbon in soils, thus contributing to solving climate change rather than exacerbating it.
Farmers should reduce their use of pesticides in favour of integrated pest management
systems that rely primarily on biological, cultural and physical controls.
More of the renewable energy that will power farming activities can and must be generated
on farms. Wind and biomass production, in particular, can provide farmers with added
income while also powering farm operations.
Countries and regions must undertake proactive steps to reduce the energy needed to
transport food by reorganizing their food production systems. This will entail support for
local producers and for local networks that bring producers and consumers closer together.
More efficient modes of transportation, such as ships and trains, must replace less efficient
modes, such as trucks and planes.
The end of the fossil fuel era should also be reflected in changes in dietary and
consumption patterns among the general population, with a preference for foods that are
grown locally, that are in season, and that undergo less processing. Also, a shift away from
energy- and meat-intensive, diets should be encouraged.
With less fuel available to power agricultural machinery, the world will need many more
farmers. But for farmers to succeed, current agricultural policies that favour larger-scale
production and production for export will need to change in favour of support to small-scale
subsistence farming, gardening and agricultural cooperatives. Such policies should be
formulated and put in place both by international institutions, such as the FAO and the World
Bank, and also by national and regional governments.
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you'll probably just call it "how I made my millions."
Source: USDA, Economic Research Service using Bureau of Labor Statistics data
Source: USDA, Economic Research Service using Bureau of Labor Statistics data.
In India the wholesale price Index(WPI) is the main measure of inflation. The WIP measures
the price of a representative basket of wholesale goods. In India, wholesale price index is
divided in three groups primary articles(20.1 percent of total weight), Fuel and Power (14.9
percent) and Manufactured Products (65 percent). Food articles from the primary Articles
Group account for 14.3 percent of the total weight. The most important component of the
Manufactured Products Group are Chemicals and Chemical products ( 12 percent of the total
weight); Basic Metals, Alloys and Metal Products(10.8 percent); Machinery and Machinery
Tools(8.9 percent); Textiles(7.3 percent) and Transport, Equipment and Parts(5.2 percentage)
Content for - India Wholesale Price Index Change - was last refreshed on Monday, June 8,
2015.
Indian wholesale prices fell 2.65 percent year-on-year in April of 2015, following a 2.33
percent drop in the previous month, as petrol prices declined further while food cost slowed.
The index has been in the negative territory since November 2014.
Year-on-year, petrol prices fell 18.44 percent, following a 17.70 percent drop in the previous
month and cost of diesel decreased by 14.39 percent, following a 12.11 percent fall in March.
Food prices rose 5.73 percent, slowing from a 6.31 percent increase in March. Among food
prices, onion recorded the highest increase (+29.97 percent), followed by pulses (+15.38
percent), fruits (+14.22 percent); milk (+7.42 percent); egg, meat & fish (+4.01 percent);
wheat (+1.79 percent) and cereals (+0.39 percent). In contrast, prices fell for potato (-41.14
percent), minerals (-28.65 percent), fibres (-13.81 percent), non-food articles (-6.18 percent),
oil seeds (-1.80 percent), vegetables (-1.32 percent) and rice (-0.04 percent).
In April, cost of manufactured products declined by 0.52 percent from a 0.19 percent drop in
the previous month.
On a monthly basis, wholesale prices declined 0.1 percent, following a 0.2 percent increase in
March.
Crude Oil Production in India decreased to 773 BBL/D/1K in December of 2014 from 782
BBL/D/1K in November of 2014. Crude Oil Production in India averaged 690.71 BBL/D/!K
from 1994 until 2014 reaching an all time high of 813 BBL/D/!K in November 2010 and a
record low of 526 BBL/D/1K in May 1994. Crude Oil Prodution in India is reported by the
U.S Energy Information Administration.
For many developing economies high inflation is a reality and high food prices are putting
pressure on real income all over the world. To begin our investigation into gold, since 2007
the world has seen a period of striking economic and financial volatility, featuring the
deepest recession since 1930s and steep decline in the value of many financial assets.
Against this gold has performed strongly with its price doubling since the global financial
crisis began in mid-2007.
Gold performance in this period has sparked something of a reappraisal of its characteristics
as an asset and led some to revisit its proper place in investors portfolios. As a store of value
which is relatively immune to inflation, financial crisis and credit default, gold has been used
for centuries to protect individuals wealth. These special properties are borne in the recent
performance of gold, and investors may continue to value them given the significant
uncertainties still facing the global economy.
Dated:08/06/2015
Gold reserves are countrys gold assets held and controlled by the central bank.
The SENSEX (BSE) is a major stock market index which tracks the performance of 30 major
companies listed on the Bombay Stock Exchange. The companies are chosen based on the
liquidity, trading volume and industry representation. The SENSEX, is a free-float market
capitalization-weighted index. The Index has a base value of 100 as of 1978-79. This page
provides - India Stock Market (SENSEX) - actual values, historical data, forecast, chart,
statistics, economic calendar and news. Content for - India Stock Market (SENSEX) - was last
refreshed on Monday, June 8, 2015.
Indian wholesale prices fell 2.06 percent year-on-year in February,2015, following a 0.39
percentage drop iin the previous month as petrol prices declined while food cost slowed. The
figure came far below market forecasts and is the deepest decline since November of 1976.
Year-on-year, petrol prices fell 21.35 percent, following a 17.08 percent drop in the previous
month and cost of diesel decreased by 16.62 percent, following a 10.41 percent fall in January.
Food prices rose 7.74 percent, slowing from an 8.0 percent increase in January. Among food
prices, onion recorded the highest increase (26.58 percent), followed by fruits (16.84 percent),
vegetables (+15.54 percent), pulses (+14.59 percent), milk (+7.33 percent) and rice (+3.80
percent). In contrast, prices fell for fibres (-22.85 percent), non-food articles (-5.55 percent),
potato (-3.56 percent), and wheat (-1.63 percent).
In February, cost of manufactured products edged up 0.33 percent, slowing from a 1.05
percent increase in the previous month.
On a monthly basis, wholesale prices declined 1.4 percent, following a 0.8 percent drop in
January.
Published on 14/5/2015
India WPI Deflation worsens in April as the Indian wholesale prices fell 2.65 percent year-onyear in April,2015, following a 2.33 percent drop in the previous month, as petrol prices
decline further while food cost slowed. The index has been in the negative since November
2014.
Published on 15/4/2015
India WPI Deflation deepens in March as the Indian wholesale prices fell 2.33 percent yearon-year in March, 2015, following a 2.06 percent drop in the previous month, as petrol prices
declined while food cost slowed. The figure came far below market forecasts and is the
deepest decline since November, 1976. In march 2014, India wholesale prices accelerated to
an annual 5.7 percent on higher food, fuel and manufacturing cost.
Tradingeconomics.com
Foreign Direct Investment
Foreign direct investment in India decreased to 2706 USD Million in March of 2015 from
3793 USD million in February, 2015. Foreign Diret Investment in India averaged 1063.34
USD Millions from 1995 until 2015, reaching an all time high of 5670 USD millions in
February , 2008 and a record low of -60 USD millions in February, 2014. FDI in India is
reported by Reserve Bank of India.
Housing Index in India increased to 238 Index Points in the third quarter of 2014 from
233 Index points in the second quarter of 2014. Housing Index in India averaged 211.21
Index Points from 2011 until 2014, reaching an all time high of 238 Index Points in the
third quarter of 2014 and a record low of 181 Index points in the second quarter of 2011.
Housing Index in India is reported by the National Housing Bank, India.