Monsoon And Food Inflation
THE SOUTHWEST monsoon had an abysmal start, arriving seven days late on June 8. Rainfall for the country was 52.6% below the normal (long-period average) during the first two weeks, with 10.1% cumulative deficiency even at the end of June. The whole of eastern and southern India (except Tamil Nadu), besides Maharashtra, hardly got any rain.
But from around the last week of June, the monsoon staged a recovery, covering the entire country by July 2 – six days before schedule. The current month so far has recorded 15.7% above-normal rainfall.
Most of the major agricultural regions save eastern Uttar Pradesh, Bihar, Jharkhand, and West Bengal have received normal rain. Monsoon And Food Inflation
Impact on sowing The monsoon’s turnaround has led to a surge in Kharif crop plantings – including the area under rice that was lagging behind last year’s levels till mid-July. The gaps have since been significantly covered, barring in pulses, while forging ahead for rice (table).
The bulk of Kharif sowings happens from mid-June to mid-August. Rainfall in June-July decides how much area is covered. August – September rain matters for yields of the crops already sown. The same rain helps fill up reservoirs and ponds and recharge groundwater tables, which provide moisture for the subsequent rabi winter-spring crops. Monsoon And Food Inflation
For now, the monsoon and kharif sowings have both been good.
El Niño caution
In agriculture, well-begun isn’t enough. In this case, the uncertainty relates to El Niño-an abnormal warming of the central and eastern Pacific Ocean waters off the coasts of Ecuador and Peru, known to suppress rainfall in India.
Most global weather agencies are forecasting- ing El Niño to not only persist but strengthen through the 2023-24 winter. All other things being the same, it would mean the monsoon entering a weak phase in August. Monsoon And Food Inflation
If rainfall activity becomes progressively weaker, the impact can extend to the rabi season. That crop, dependent on stored rainwater, might take a bigger hit than the one already planted this kharif. Since winter rain is necessary also to sustain low temperatures, especially for wheat, it would be a double whammy. Monsoon And Food Inflation
The implications
At 71.1 million tonnes (mt) as on July 1, rice and wheat stocks in government god owns were the lowest in five years for this date.
While rice acreage has picked up after mid-July, it’s not clear how much of that is under short-duration varieties of about 125- days of seed-to-grain maturity. Had the rice belt, stretching from eastern to southern India through Chhattisgarh and Odisha, got rain on time, farmers may have planted more long-duration varieties of 150-155 days, yielding an extra 1-2 tonnes per hectare.
There are reports of Punjab and Haryana farmers also having to re-transplant paddy in large areas along the Beas, Sutlej, Ghaggar, and Yamuna rivers after their already-planted crop suffered inundation from ex-cess rain and water released from dams in Himachal Pradesh. Re-transplanting would, again, be of shorter duration varieties that usually yield less. Monsoon And Food Inflation
With El Niño fears adding to the uncertainty over rice as well as wheat production – amid depleting stocks, 12.7% year-on-year retail cereal inflation in June, and national elections scheduled in April-May 2024-the Narendra Modi government clearly want to take no chances. Monsoon And Food Inflation
Between May 2020 and now, it has banned the export of wheat and all non-par-boiled non-basmati rice. It has done the same for sugar, where the estimated 6.3 mt stocks with mills in end-September 2023 would be a six-year-low. While comfortable for now- like with rice and wheat – what El Niño might do to the cane to be crushed in the new sugar year from October remains to be seen.
Other crops: pulses, edible oil
Among pulses, arhar (pigeon-pea) has registered the highest acreage dip. This is because of it is a 150-180 days crop grown mainly in Maharashtra, Karnataka, and Telangana, which were rain-deficient during the sowing window. Urad (black gram) area has also fallen, as farmers in Madhya Pradesh (MP), the largest producer, have planted more soybean and maize.
At the same time, the good rain in Rajasthan is expected to deliver a bumper crop of moong (green gram). The supply situation is comfortable also in chana (chick-pea)- due to government agencies procuring nearly 2.4 mt during the last marketing season (April-June)–and masoor (red lentil), which is being imported at $650-680 or Rs 53,000-56,000 per tonne from Australia and Canada. The current landed rates in Indian ports are below the government’s minimum support price of Rs 60,000/tonne for masoor. Monsoon And Food Inflation
Ample chana stocks, bumper moong pro- duction, and imports of masoor (which can partially replace arhar dal, at least in restaurants and canteens) should keep a lid on pulses prices
Edible oil inflation, too, is likely to remain low. This is primarily on account of imports, projected to top 15 mt, a new all-time-high, in the current oil year ending October 2023. While international prices have gone up 10- 15% in the past month – on the back of El Niño concerns over Indonesian and Malaysian palm oil output and Russia not renewing a United Nations deal enabling Ukrainian sun-flower exports through Black Sea ports-sowing of kharif oilseeds has also progressed well.
Milk and vegetables
The most encouraging picture is probably in milk, where February-March saw unprecedented shortages. Dairies in Maharashtra then paid up to Rs 38 per liter for cow milk containing 3.5% fat and 8.5% solids-not-fat. Ex-factory prices of cow butter and skimmed milk powder (SMP) hit Rs 430-435 and Rs 315-320 per kg respectively. Monsoon And Food Inflation
From those highs, butter prices have now crashed to Rs 360-370 and SMP to Rs 260- 270 levels, even as dairies are procuring milk at Rs 32-33 per liter. Supplies should further ease with buffalo calvings beginning in August. It will reflect in increased milk pro- duction, peaking during the winter and remaining high till next March-April. Monsoon And Food Inflation
High milk prices, plus improved fodder availability from both pre-and post-monsoon showers, are triggering the expected supply response from farmers at the right time. One can expect something similar in vegetables, where retail prices, not just of tomatoes, are on fire (chart). It may show up in an unacceptably high consumer price index inflation number for July. Monsoon And Food Inflation
But given the much faster supply response tomatoes yield fruit in 2-2.5 months, whereas cows calve and give milk only nine months after insemination-vegetable inflation should fall as easily as it has risen. Monsoon And Food Inflation