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29 Aug 2018


Impact: Positive (Agro Based Industry); Positive (Rural Consumption); Positive (Inflation)Brief: The 4thestimate of FY18 Kharif production - estimates that food grain production has increased by 1.8% (as compared to 0.3% in the 3rd Estimate). For FY19, Acuite' estimates production to increase by 0.9%. Area sown has however come down by (-) 0.5% in FY18 and has further come down by (-) 1.3% in FY19. The largest increase in yields is seen in Sugarcane as well as Cotton production in FY19.As per Ministry of Agriculture's 4th estimate, sown are in the Kharif season has come down by (-) 0.5% in FY18 and further declined by (-) 1.3% in FY19. For Foodgrains as a whole, the area under sown came down by (-) 1.7% in FY18 and (-) 2% in FY19. At 12 million hectares, the area under sown of Cotton has seen the maximum increase in FY18 (16.7%). However, this declined by (-) 2.4% in FY19, currently sitting at 11.7 million hectares. Other significant changes were seen in Oil Seeds (-) 8.1%, Cereals (-) 1.6% and Pulses (-) 2.3% in FY18. In FY19, these figures stand at 52.3 million hectares ((-) 2%), 13.1 million hectares ((-) 2.3%) and 16.7 million hectares (1.7%) respectively, category wise. We see these declines primarily driven by Government land acquisitions for the creation of road infrastructure and urbanization (land usage for housing, retail complexes and other purposes). In terms of yields however, we see a positive impact in almost all categories. According to our estimates, the biggest beneficiaries have been Cotton and Sugarcane, which will witness 16.1% and 17.9% increase in production, respectively. The two categories have benefited from higher MSPs, which were increased by 27% for Cotton and 8% for Sugarcane. The latter also saw positive sentiment from the optimized payment mechanism initiated by states for the timely release of funds to Sugarcane farmers. The next big beneficiary has been Oilseeds, which has been reeling under significant inflation at the wholesale level (WPI). The category recorded a YTD WPI of +8.3% in FY19 while contracting by (-) 11%, the previous year. The MSP for the Oilseeds category has increased by 15% for the current year – translating into rising yields. We therefore believe that the higher MSP and the resultant impact on production/ yields will calm the supply side and act as anti-inflationary. In terms of absolute production differential, we estimate that Sugarcane production will be higher by 674 lakh tons in FY19. Cotton, the next big gainer, will experience a bumper differential of 56 lakh bales, further reducing the input cost for textile related industries. Oilseeds on the other hand, will see an increase of over 3 lakh tone, this season over same time last year.
Area in Million Hectare (Kharif Season)

Production in Lakh Tons (Kharif Season)

Area under sown% age change
Agricultural products101.4100.999.6-0.5%-1.3%
Sugar cane4.

Production in Lakh Tons (Kharif Season)

Agricultural productsProduction% age change
Food grain138.28140.72142.01.8%0.9%
Sugar cane3060.737694443.123.1%17.9%

# is lakh bales of 170 kg