Leave a message  call logo +91 99698 98000

PERSISTENTLY LOW REALIZABLE FOOD CROP PRICES LEADING TO A LOWER AREA UNDER SAWN AND CONSEQUENT LOWER PRODUCTION – NORMAL MONSOON NOTWITHSTANDING

12 Oct 2019

Back

Acuité believes that during the monsoon session of June-September CY2019, India has received normal rainfall. This may sound contrarian to the view that this year’s average is 10% higher to the long-term average (LTA). However, since the standard deviation of the normal range is ±10%, the current year’s rainfall can be at best treated as being close to the upper band of normal rainfall. Nevertheless, the minor excesses may have been detrimental to productivity and the impact is already seen on certain classes of food commodities, seasonal vegetables and changes in cropping strategies.

At a sub-divisional level analysis on rainfall distribution, it is apparent that 77% sub-divisions have received normal or excess rainfall, which is highest when compared to the previous 5 years. Consequently, we reckon that a highly even distribution of rainfall will have a positive impact on crop production.

Notwithstanding, due to the prevalence of lower prices of certain food grains over the past two years, there seems to be a shift in cropping patterns towards the cash-crops. Therefore, area under sown for cotton (4%) and sugarcane (9%) is above the normal sown area. Resultantly, production in these two cash crops is expected to remain high. We reckon that cotton production, which is critical for the textile industry, will be higher by around 12% in the FY20 cycle. Similarly, sugarcane production is also expected to remain healthy during this period despite a negative growth on account of bumper production during the previous cropping year - leading to an unfavourable base.

When considering food grain production (cereals and pulses), area under sown has dropped by (-) 0.6% during the current cropping year. Resultantly, the production is expected to remain below to that of the previous year (-0.83% estimated by Acuité and -0.80% estimated by Ministry of Agriculture). This will lead to inflationary tendencies in H2 FY20 as the benefits of better yields emanating from the Rabi season are unlikely to materialize in the current fiscal. Therefore, the current year’s cropping pattern may elevate the food inflation trend, which is around 1% for the past two years.

Growth in Kharif Crop Production


* Acuité projection, # Agriculture ministry’s projection


Production during kharif season:


Production in both season (kharif + Rabi):


Rainfall distribution: