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Dying monsoon to shoot up prices of farm products

Hopes of reviving wilting crops have receded further & lakhs of hectares will remain fallow as the erratic monsoon is forecast to weaken further in August.

Updated: Jul 27, 2012, 07.03 AM IST
Dying monsoon to shoot up prices of farm products

NEW DELHI | HYDERABAD: Hopes of reviving wilting crops have receded further and lakhs of hectares will remain fallow in western and southern India as the erratic monsoon is forecast to weaken further in August, sparking fears that prices of farm products such as pulses and edible oils may shoot up alarmingly.

India's problem has been compounded by adverse weather in other parts of the world, particularly the US, which is a major player in the global market for farm products and is reeling under its worst drought in half a century.
This is expected to lead to higher food prices in the international market, stoking inflationary pressures in India.

Dying monsoon to shoot up prices of farm products
Food Minister KV Thomas said the international situation is already casting its shadow over India. "We are globally connected. Any price rise in the global market does affect us. But we are taking serious steps to control it," he said.
An EGoM is scheduled to review the grim agricultural situation on Tuesday.

Agriculture experts said India is not immune to the weather-related farm distress that has infected many parts of the world.

"I see an Asian food crisis emerging. Not only India, but China and Thailand are also seeing a drought," said Aldas Janaiah, head of School of Agri Business Management and board member of the World Agriculture Forum.

Total rainfall has been 21% below average so far this season, but grainbowl states such as Punjab and Haryana have not received even one-third of normal rainfall.

The situation in Gujarat and Maharashtra is grim, and prospects of a revival are dim. "August will be drier than July," said Shailesh Nayak, secretary in the ministry of earth sciences, which governs the Indian Meteorological Department.

ET View: Bring on the rain makers!

The gods haven’t obliged, but politicians can. With 74 million tonnes of grain in stock, production shortfall in rice is not a problem, if the distribution is managed well. Oilseeds and pulses are a challenge (so is cattle fodder).

Their import will widen the current account deficit, adding urgency to diesel decontrol and popularising investment instruments that compete with imported gold.

Idle thermal capacity can more than offset any shortfall in hydel power, if policy de-bottlenecks coal mining and regulation allows higher fuel prices to pass through. With agriculture at just 14% of GDP, drought no longer need derail the economy. Provided politicians lead from the front.
May be Too Late for Farmers

There is threat of El Nino in the latter half of the monsoon; so, September too will be not much active and we see no rains in October as of now," Nayak said.

Even if the rainfall revives now, it is already too late for many farmers. About 10 lakh hectares in Maharashtra and 8 lakh hectares in Karnataka will remain uncultivated this season, affecting output of coarse cereals and edible oils. India is the world's leading edible oils importer and domestic demand has been growing in step with rising incomes.

Thomas said edible oils and pulses are an area of concern, although availability of foodgrain and sugar is not an issue as India has surplus stocks of these commodities. "We may ask public sector trading companies like PEC, STC and MMTC to import pulses on government account," he said. The minister added that the government is keeping a close watch on the price movement of some commodities futures.

The Forward Marketing Commission (FMC), which regulates commodities futures trading, is already monitoring the price movement of five agricultural commodities - potato, chana, soyabean, soya oil and mustard seeds.

It has asked exchanges to charge a higher deposit money to trade in commodities such as soyabean, mustard seed, soyameal and turmeric early this month.

"We are watching price movement closely and will act if there is any anomaly," said FMC Chairman Ramesh Abhishek after apprising the food minister about the measures it is taking to curb speculation and volatility in the futures market.

He said the commission has increased margin money on a few commodities to prevent any manipulation in the futures market. "We will not allow traders to manipulate prices. We may ban if the volatility is seen abnormal."

Laxman Singh Rathore, director-general of the weather office, said the overall rainfall deficit is likely to improve. "The situation in north-west India and interior peninsula is a matter of concern. In coming days, rains are likely to improve in the eastern, central and Indo-Gangetic parts of the country to bring down overall rain deficiency from the current level of 22%," he said.
Meanwhile, the government has issued a crop advisory, saying parts of area under groundnut, pulses and jowar and bajra may remain unsown in rain-deficient states of Maharashtra, Karnataka, Gujarat and western Rajasthan.
"The contingency plans for that are prepared and will be implemented focusing on fodder production; short-duration pulses and conservation of moisture for early planting of rabi crops like toria, sorghum and gram etc have been advised," the report said.

Even in Andhra Pradesh, which had received normal rains so far, the state government is concerned about the drop in rice output this year. It has asked farmers to switch over from rice to growing sturdy crops like maize, jowar and ragi that require less water.

"We are doing this to protect farmers' income. We are hoping that the fall in paddy production will be made up by the increase in production of other foodgrain," said Nagi Reddy, special secretary in the state's department of agriculture.

Andhra Pradesh, which is the second-largest rice producer, expects a drop of 25% in rice output because of insufficient rains, which have left four major dams with no water to irrigate fields in the delta regions of Krishna, Godavari, Prakasam, Guntur and Nalgonda districts.

The estimate of sugarcane availability in Maharashtra has been further downgraded from 65 million tonnes in June to 60.5 million tonnes. This is likely to lower sugar production to 7 million tonnes from 9 million tonnes last year.

"The decline has come mainly because of absence of rainfall and diversion of cane for fodder. If rainfall does not improve in next 15 days, then the cane availability is likely to worsen further," said Vijay Singhal, Maharashtra's sugar commissioner.

Maharashtra has been facing drought-like conditions from the beginning of the current year, reducing cane area from 10.05 lakh hectares last year to 9.45 lakh hectares. Cane is being diverted on a large scale for consumption as fodder.

Tea production in south India is also likely to be hit badly. Rains in tea-growing regions of Tamil Nadu, Kerala and Karnataka have been deficient this year, which may lead to a lower crop for the fourth successive year. Production was down by over 9 million kg in the January-May 2012 period. The industry feels the shortage is likely to worsen in June and July.

"The June crop was also poor. The total shortfall in south India could be around 10-12 million kg by the end of June. The loss should have come down in July when normally there are heavy showers. But the dry spell has continued. Regions like Wayanad, Vandiperiyar and parts of Munnar received poor rains," said Chacko P Thomas, managing director of Kanan Devan Hill Plantations Company.
Industry officials say even if it rains in the next two months, the situation may not improve.

"The losses are so heavy that it may be difficult to recoup all of it even if the rains come in the next couple of months," said R Sanjith, head of commodities of the United Planters' Association of Southern India.

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