Likely lowest production in nine years to push prices, reduce FCI burden
Production of rice, a key summer crop, could be around 90 million tonne, 10% lower than the government’s estimate for the kharif 2019 season and down 12% from the previous kharif crop, private weather forecaster Skymet has said. If Skymet’s prediction holds good, it will be for the first time in five years this key cereal’s output may see a decline (about 90% of rice is produced in the summer season) and could be the lowest in nine years. Though this is the first time the firm has given a crop forecast, its estimate has added to the worry that the agriculture sector’s performance could be worse than expected during the second half of the current fiscal year and a drag on the gross domestic product (GDP) growth.
As reported by FE earlier, kharif 2019 pulses output could be at least some 6 lakh tonne lower than the 82.3 lakh tonne estimated by the government, due to large-scale crop damage in key producing states such as Rajasthan, Maharashtra, Madhya Pradesh and Karnataka.
Also, the forthcoming rabi pulses crop may fall, given that prolonged monsoon and resultant floods have delayed sowing activity — on a year-on-year basis. The winter-sowing of pulses is now down by a fifth. Of course, the next rabi crop will reflect mostly in the GDP for FY21
Citing its review of the monsoon spread, the initial dry spell and the prolonged rains that caused floods in many areas, Skymet said 2019 soyabean production would also be 12% lower than last year at 12.15 million tonne. Gross value added (GVA) in ‘farm and allied sectors’, grew 2.1% in Q2FY20 as against 4.9% in Q2FY19.
If the kharif 2019 rice crop turns out to be lower, it could push up prices — market prices are currently lower than minimum support prices in eastern India — but may also reduce the burden of rice procurement on the Food Corporation of India for the current crop year (July-June). Also, the government is likely to offload part of its excess stocks in the open market.
The government has been trying to shift paddy farmers to other crops, particularly in water scarce states like Punjab and Haryana, due to depletion of ground water table. It is estimated that nearly 5,000 litres of water goes into production of just 1 kg of rice As on November 1, the FCI had stocks of 73.65 million tonne of wheat and rice (including 19.65 million tonne in the form of paddy), much above the buffer norm of 30.7 million tonne on October 1. In 2018-19 marketing season (October-September), FCI had procured 44 million tonne of rice and this was a record The current foodgrain storage capacity in the country is around 88 million tonne, with over 75 million tonne covered and 13 million tonne covered area plinth (CAP).
“If there is a fall in output, the pressure on FCI will be less to buy the rice. The open market price may also be at a level near MSP,” a government official said. Though the arrivals of kharif-grown paddy has started, mostly in Punjab and Haryana, it would pick up from mid-December in other states like West Bengal and Chhattisgarh, he said.
The Centre is also considering reducing the reserve price of rice by almost Rs 500/quintal under open market sale scheme (OMSS) of the FCI for bulk buyers due to poor offtake. Current reserve price is Rs 2,785/quintal. The plan was to sell around 2 million tonne rice from official reserves in 2019-20 Meanwhile, Skymet also said the cotton crop this year may surge to the highest level since 2013-14 thanks to a good weather in producing states of Gujarat and Maharashtra and also improved yields and overall increase in acreage. The cotton area rose 4% to 12.76 million hectare in 2019. The soybean and pulses output is expected to decline 12% and 4.5%, respectively year-on-year, the agency said. (see chart)
“Several kharif crops such as soybean, groundnut, cotton, urad and tur were adversely impacted and damaged due to excess rains in the last two months of monsoon season. In many districts, high soil moisture during the entire month of September caused heavy losses to crops as persistently above 50% moisture is bad for crops,” said Jatin Singh, CEO of Skymet.
A total of 137 districts in 12 states were affected by excess rains and resultant floods which inundated 32.09 lakh hectare of agricultural land, Skymet said.