After foodgrain estimate cut, all eyes on rains

India, faced with a severe drought that shrunk the rice and coarse cereals crop, has pared its foodgrain output estimate for the current year ending June by nearly 7% to 218.19 million tonnes, signalling only a good monsoon would give some respite from high food prices and inflation.

It raised the grain production forecast from its February estimate of 216.85 million tonnes with rearguard action to combat the 2009 calamity that affected nearly two-thirds of the country, yielding some ground results. But the key kharif rice crop appeared to be taking a beating with output set to drop nearly 10 million tonnes from the robust 99.18 million tonnes production witnessed in 2008-09 (July-June).

The farm ministry, in its third advance estimate, on Wednesday
projected another bumper wheat crop with production touching a record 80.98 million tonnes, a tad higher than last year’s record 80.68 million tonnes.

But the wheat output estimate belied the farm ministry’s initial euphoria when it expected production to top 82 million tonnes. An unusually hot March hit the crop during the flowering stage.

The marginal rise in wheat and rice production estimates from February  in any event is of little consequence since the government’s foodgrain stocks at the start of this month were at an eight-year high of 59.94 million tonnes due to bumper procurement for two consecutive years.   

“A mounting buffer and the new production estimates are not going to make any difference to food inflation as the numbers are known and factored in the prices,” said a Mumbai-based commodity analyst.

Food inflation for the week ended April 24 was up 16.04% year on year driven by high prices of pulses, food grains and milk.
Prices of rice and pulses have been ruling high since last year. Sugar prices have slid in recent weeks from record highs after a better-than-forecast output.

Policy makers expect food prices to soften on the back of a substantial rabi crop, driven by a good monsoon.

The analyst said these numbers only reinforced the fact that production in 2009-10 is lower especially in case of coarse grains, oilseed and pulses.

“People are waiting for timely monsoon onset and its robust performance over the next four months will only help bring down prices,” he said.

Rice traders said the government has been overcautious in its estimate of paddy output and would revise it upwards subsequently.

“If the rainfall is projected to be good this year, everything should go on well,” said Vijay Setia, a former president of the All India Rice Exporters’ Association, without giving much credence to the fresh crop estimates.

The India Meteorological Department has forecast this year’s monsoon rains to be normal at 98% of the long period average. Nearly 60% of the country’s arable land is not irrigated and so is dependent on rains.

Rice and wheat are staple for the country’s billion-plus people.
Oilseed output in the year ending June is seen at 25.41 million tonnes, down nearly a million tonnes from earlier estimates, and about 2 million tonnes lower from last year’s 27.72 million tonnes.

High temperature in March during the maturity stage hit oilseeds output, mainly mustard-rapeseed, in Rajasthan, Gujarat and Uttar Pradesh, farm ministry officials said.

The government has pegged mustard output at 6.59 million tonnes, lower from 7.20 million tonnes produced a year ago.
Groundnut output is forecast at 5.38 million tonnes against 7.17 million a year ago, while estimates for soybean has been raised to 10.54 million tonnes from 9.91 million a year ago.

“The industry estimate on oilseeds is also lower at 23.11 million tonnes and it could be still lower because the yields have come down after a scorching March,” said BV Mehta, executive director of the Solvent Extractors’ Association of India.

He said the oilseeds crop estimated was the lowest in the last five years but it will not have any bearing on the prices as imports of palm and soy oils were high and large stocks of oilseeds were lying uncrushed due to lower oil prices.

But Mehta said there was a risk of a further decline in output next year as oilseeds farmers might shift to other crops unless corrective action through raising of current low import duties was taken soon.

As per the estimates, pulses output is seen marginally higher at 14.77 million tonnes compared with 14.74 million tonnes in the previous estimates. The country produced 14.57 million tonnes pulses last year.

India has been a net importer of pulses and oilseeds, and the scenario is unlikely to change much in the near future. It annually buys about 3 million tonnes of pulses and imports more than half of its annual needs.

The estimates pegged sugarcane production for the year at 274.66 million tonnes, sharply higher than the February estimate of 251.27 million tonnes, but lower from last year’s 285.03 million tonnes.

Agriculture minister Sharad Pawar had earlier this month pegged India’s sugar output during year to September at around 18.5 million tonnes, up nearly 4 million tonnes on year, owing to higher cane yields witnessed in key producing states of Uttar Pradesh and Maharashtra.