Monsoon rains remained subdued in the last week of August, with precipitation levels trailing well below norms, due to which the cumulative rainfall surplus narrowed to 6% above normal, Barclays and IDFC First Bank’s analysts’ said. Out of IMD’s 36 meteorological subdivisions, 30 have received normal or above-normal rainfall this season, while six regions are registered as deficient. The IMD has noted that the rainfall levels could improve in September, with monthly rainfall likely to be above normal. While rainfall levels started June on a weak note – at 8% below the long period average (LPA) – they were 17% above the LPA in July, and 3% above in August. Analysts noted that the sowing trend remains weak.
High buffer stocks should help keep rice prices in check
The steady progress of the monsoon should help farm output this year. Data available with Barclays suggests that the area sown through 27 August is just 2% below last year’s level – 104.5mn hectares compared with 106.2mn hectares in 2021. Barclays added that overall, the sowing of rice remains low (-6.0% on-year), although the high level of buffer stocks should help to meet domestic demand for this staple, and keep price rises in check. In addition to rice, the sowing of pulses (-5.0% on-year) and oilseeds (-1.1% on-year) is also lagging prior-year trends, while for the rest of the key crops sowing remains ahead of last year’s levels.
Meanwhile, sowing of cotton and coarse cereals were higher than last year, analysts at IDFC First Bank, said. Reservoir levels were currently tracking at 82% of live storage capacity, higher than last year (129% of last year level) and higher than last 10-years average (125% of last 10-year average). “This augurs well for rabi crops which are mostly reliant on irrigation facilities,” they added.
2nd straight month decline in employment demand on rural growth
IDFC First Bank analysts, in a report, noted that the employment demand continued to decline for the second consecutive month in August, indicating improvement in rural growth recovery. Part of the decline will be due to seasonal factors as kharif sowing nears completion. Other rural activity indicators also show some improvement in growth conditions such as two-wheeler sales, diesel consumption and railway passengers etc. Rural wage growth continues to remain subdued averaging at 4.5% in 2022.
Extension of free ration scheme could have implications for India’s rice exports
At the end of sowing season, an official assessment of deficient sowing and probable impact of weaker spatial distribution of rainfall will be provided by the government later this month. Barclays noted that given the persistent rainfall deficiency in the key paddy sowing states of Uttar Pradesh, Bihar and West Bengal, experts estimate that paddy output this year will be at least 6-10MT lower than last year’s level. “In this context, the extension of the free ration scheme to H2 FY22-23 could have implications for India’s rice exports – and could become a cause of concern for key importing partners,” it said.