The southwest monsoon rains that India received during the first week of July in the key pulses, sugarcane and cotton growing areas, were a welcome respite after a harsh June. Slow advancement of monsoon and 29% below average rains during the first month of the monsoon season has hit the sowing of Kharif pulses, oilseeds and cereals. This has added fuel to the already sky rocketing prices of agricultural commodities.
Arriving at the conclusion at the start of the monsoon season may be an incorrect way of predicting the markets. This is because, the month of June account for only 14% of the total south west monsoon rains, while July, August and September contributes around 34%, 31% and 37% of the total rainfall during the monsoon season (June-September). Also, it happens that the sowing which gets delayed in June, gains momentum with the monsoon progress in the month of July.
Indian Metrological department in its second long range forecast has predicted monsoons to be near normal at 96% of the long period average for the season June ?September and for the month of July and August at 98% and 96% of its LPA respectively, both with a model error of ? 9 %.
Although monsoon has advanced further over many parts of central and northwest India, the amount of rains received so far and its distribution over the different regions have been uneven, causing delay in sowing of most the Kharif crops like oilseeds, cereals, paddy etc. Nevertheless, good rains in some pulses and cotton growing hub has boosted sowing of these crops last week.
Paddy, the largest sown Kharif crop in India, accounting for over 68% in total Kharif food grain output, has covered 55 lakh hectares area so far, 26.3% lower compared with last years 75.1 lakh hectares as on 5th July. However, with only 14% of the normal sowing being planted till date, the adequate distribution of the remainder monsoons over the rice growing regions of West Bengal, Bihar and Assam would be crucial for the crop?s output this year.
The area under oilseeds, the other victim of the southwest monsoon, has been 28.9% lower so far at 26.55 lakh hectares. Among oilseeds, groundnut acreage has been hit drastically and is down 37.6% lower on the back of scanty rains in the chief producing state- Gujarat. Soyabean, the largest produced oilseeds in India has witnessed a 25.5% drop in area as on 5th July at 18.99 lakh hectares. However, soyabean acreage may get a boost in the coming days as farmers may opt for this crop instead of going for cotton due to lucrative returns earned last year and being less labour intensive. In the last six months, soyabean prices have almost double on the back of supply tightness of oilseeds globally. With the improvement in the rainfall activity and sowing, some downside pressure in the prices may be seen in the coming weeks.
Pulses sowing have recovered considerably during the last week with good rains in some parts of Maharashtra and AP. The area sown under pulses which was down by 34% as on 28th June, 2012, is now up by 5.3% at 13.04 lakh hectares compared to previous year. Pulses acreage may remain more or less steady this year with no significant shift seen in the crop patterns in the growing areas.
With respect to cash crops like sugarcane, planting is almost complete with area under cane up by 5% so far at 52.7 lakh hectares. However, the output of sugar is expected to decline next year on account of drop in yield in the second largest cane producing state, Maharashtra. In other south Indian sugar producing states also output is expected to decline. This expectation has already pushed sugar prices higher in the past week. Cotton, the other major cash crop, has witnessed an increase in area by 8.8% so far. 41% of the normal sowing is completed due to early sowing in the irrigated area of North India. However, cotton acreage might decline by 5-10% this season as farmers may opt for other remunerative crops like guar in Rajasthan and soyabean in Maharashtra.
Sowing of major kharif crops is still lagging behind mainly because of the below average rains so far. Thus, rainfall in the month of July would be crucial for kharif crops that account for almost 53% of the total Indian grain production.
Going by the MET department?s forecast, if the rainfall is well distributed in the coming weeks, it would aid sowing and would bring prices of most of the agricultural commodities, mainly oilseeds and pulses under downside pressure. However, at the same time the inherent demand supply fundamentals of the commodity, the currency factor, and the price movements in the international markets would also impact the prices of these in the coming months.
The writer is associate director, commodities and currencies, Angel Broking