The Indian government’s first advance estimate of kharif crops this season has not surprised agriculture experts, industry and analysts in view of the south-west monsoon’s behaviour this year. However, some feel that the production will likely be even lower and some of the estimates could be pruned in the next round, particularly in the case of tur.
The south-west monsoon was impacted by warm ocean water phenomenon El Nino with July witnessing excess rainfall and August experiencing a 32 per cent deficiency in precipitation.
Consumer bias in system
Former Agriculture Secretary Siraj Hussain said, “Lower estimate of production of various kharif crops is not surprising. It is good that the government has realised the importance of releasing correct estimates.”
Noted economist and former Commission for Agricultural Costs and Prices (CACP) Chairman Ashok Gulati said there was consumer bias in the system and farmers stand to lose.
In particular, he differed with the Agriculture Ministry estimates on tur (pigeon pea) production. “I disagree with the government’s estimate on tur output and its prices will remain firm and even can flare up. Because the area under tur was less, so how come the production will be the same or more?” he wondered.
Weather impact
Bimal Kothari, Chairman, IPGA, said there is no significant difference between the first advance estimates of tur and last year’s crop size. While September rains had rekindled prospects of a good crop, heat conditions in October are seen hurting tur yields. “It is very difficult to assess the crop size as there has been a big impact of the erratic weather due to El Nino on the pulses crop,” he said.
Rahul Chauhan of IGrain India said the projections of tur crop are on the higher side in the first advance estimates, while urad and moong are quite realistic. We expect tur crop to be less than 3 million tonnes this year due to lower crop in Karnataka and Maharashtra.
Gulati said the only concern (over pulses) was about tur. I feel it is late (for the Centre to act). “The government should have imported it earlier. Let’s wait till December-January,” he said.
Erratic distribution
Kothari said, “We will have to wait and see how the harvest of tur turns out from December onwards.” Even with the estimated production of 3.4 million tonnes (mt) of tur, there will be a shortage of 1.2 mt for which India has to depend on imports and prices are unlikely to come down.
DK Pant, chief economist at India Ratings, said, “The estimates are clearly as per the impact of 2023 monsoon which was below normal. Though acreage was not affected due to the uneven monsoon, there was a decline in productivity of foodgrain crops since rainfall did not come at the right time when farmers needed”.
Mr Shashank Srivastava, Senior Executive Officer, Marketing & Sales, Maruti Suzuki India Ltd, said, “The projections regarding kharif production are not unexpected as the spatial and timeline distribution of monsoon rainfall was erratic. Clearly, lower agricultural output will weaken rural consumer sentiment,” he said.
No worries over rice
Rohan Kanwar Gupta, Vice-President and Sector Head, Corporate Ratings, said the decline in crop production follows an uneven monsoon precipitation with the country recording precipitation at 94 per cent of the long period average during the monsoon season.
BV Krishna Rao, The Rice Exporters Association of India President, said rice production was lower by 3.8 per cent and it was not a concern. “Rice production is ample to meet domestic demand,” he said.
Gulati said, “There is no worry for rice because of ample stock with the government and inflation of rice has been checked. The government has also brought down wheat inflation as it has been unloading the grain from official reserves almost at its minimum support price (MSP). In rice, the reserve price (by FCI) is lower than its new MSP value, which is more than ₹30.”
However, he said the move amounts to dumping because the Government has ample stocks and brings down prices for the farmers through such measures.
Wider ramifications
Hussain said cereal inflation is already elevated and it is expected to be at elevated levels due to lower production, unless the availability is augmented through import. “Even in the case of pulses and edible oils, in which the country is not self-sufficient, the inflation will be elevated due to lower projected production,” he said.
Kothari said as far as moong is concerned, the dry spell in August has impacted the crop in Rajasthan, while the erratic weather has hit the urad crop across different States. “Overall the upward pressure on pulses prices is likely to remain,” he said.
Narinder Wadhwa, President, Commodity Participants Association of India (CPAI), said a decrease in crop production will have a wider ramification impacting the profit margins of companies in the food and beverage industry, fertilizer and insurance sectors and this in turn will pull down stock prices of these companies.
New Delhi-based trade analyst S Chandrasekaran said the government’s food and fertilizer budget is an insurance premium to guard against depreciation of the rupee. “Geopolitical climate and recent UN report on groundwater depletion in North-West India cautions us to focus on food security with limited focus on high value agriculture crops and value-added products but not on low value commodities,” he said.
Oilseeds: Govt corrected?
BV Mehta, Executive Director of Solvent Extractors’ Association of India (SEA), said the Government had estimated the soyabean crop high at 14.9 million tonnes (mt) last year, whereas the industry estimate was at 11.5-12 mt.
“Had it been 15 mt of crop, there would have been a lot of carry forward this year,” he said. Stating that the acreage under soyabean crop is more or less the same, he said the government had corrected the numbers this time in its crop estimation.
“Basically the crop was reported high last year. That is the reason why there is a decline of around 17 per cent in the crop output,” Mehta said.
The Government has estimated groundnut production to drop by 8.5 per cent to 7.83 mt from 8.56 mt.
Mehta said though the area under groundnut is lower this year, productivity is much better. “Since the farmers had conserved water they could irrigate during the dry period,” he said, adding that groundnut output could come near last year’s production.
Cotton scenario unclear
Anand Popat, a Rajkot-based trader in cotton, yarn and cotton waste, said it is too early to pass a judgement on cotton but the 2023-24 season balance sheet will be tight. “Farmers are bullish this season, so arrivals could be limited. But if prices drop, more exports will take place,” he said.
Rahul Mehta, Chief Mentor, Clothing Manufacturers Association of India, said the garment industry is dependent on how agriculture fares, though indirectly. “Any shortage of cotton and resultant price increase will affect garment prices as we saw in 2021 and 2022. As a result, the impact of a lower crop may not be as impactful to the industry as before,” he said.
Ramanuj Das Boob, a sourcing agent for multinationals in Karnataka’s Raichur, said, “We remain committed to closely monitoring the evolving situation and will act responsibly in our efforts to stabilise the cotton market in the interest of all the stakeholders — farmers, ginners , spinners and exporters.”
With inputs from Prabhudatta Mishra, New Delhi; Vishwanath Kulkarni, Bengaluru; KV Kurmanath, Hyderabad; Suresh Iyengar, Mumbai; and Subramani Ra Mancombu, Chennai.