Kharif crop faces many risks

There is potential for a shortfall in production in pulses and oilseeds

A day after the south-west monsoon hit the Kerala coast on May 30, the Union Ministry of Agriculture quietly uploaded the production target for kharif 2017-18 crops on its website. To be sure, the Minimum Support Price for the kharif crops is yet to be announced (as of June 1).

Rice, coarse cereals (mainly maize), pulses (mainly tur/arhar or pigeon pea), oilseeds (mainly soyabean, groundnut) and cotton are the most important kharif season crops. Sugarcane, a 11-12 month crop, is also harvested at the end of the season.

Are the targets set by the government achievable? On paper, yes; yet, several challenges are likely to visit the upcoming kharif season. Production gains of 2016-17 may not be repeated because of policy prevarication. There are at least two crops with high potential for a shortfall in actual production. These are pulses and oilseeds.

It is common knowledge that New Delhi failed to meet the price expectations of oilseed and pulse growers in 2016-17. After two years of setback to harvests, pulse and oilseed growers rose to the occasion in 2016-17, expanded the planted area, improved their input management and harvested large, and in some cases, record crops.

However, their price expectations were not realised as policymakers did little to arrest the price collapse. Intervention was either absent or rather timid. Farm-gate prices either stayed below the MSP or close to it for most of the season. Two crops — tur/arhar and soyabean — represent a case in point. So, one can expect a supply response to prices next season. Growers will respond in the only manner they know — they will shift to a more remunerative crop.

So, at the time of kharif harvest four months away, the country faces the strong possibility of a decline in pulses and oilseed production. While it would be premature at this point to put a number to the harvest size, the risk of a decline in production is very real. In the event, dependence on imported pulse and edible oil will escalate and domestic market prices will tend to rise sharply from the current consumer-friendly levels. The policymakers will then get into a fire-fighting mode as is their wont.

If oilseeds and pulses production risks a decline and price rise, cotton may witness a different kind of challenge. A likely record acreage and record harvest can lead to a glut situation and collapse in domestic prices, which can hurt growers. Cotton farmers have seen fairly remunerative prices in recent months and are encouraged to expand planted area.

From last year’s 10.3 million hectares (a fall of 10 per cent from the previous year), cotton area, this season could expand by well over 10 per cent to 11.5 million hectares with the possibility of reaching close to 12 million hectares. If the weather holds as well as the forecast, India’s cotton crop may rebound by as much as 20 per cent from last year’s 32.6 million bales.

In other words, actual production may outstrip the target of 35.5 million bales. Given that the world cotton market is going to be awash with cotton in the months ahead, there is the real risk of a cotton price collapse and growers facing distress conditions. New Delhi will have to begin right away to prepare itself to the unfolding scenario.

There is one more commodity that deserves a close watch. It is sugar, and by implication the sugarcane crop. Sown area for sugarcane is an estimated 4.65 million hectares. Under normal weather conditions, cane planted in at least 5 million hectares will result in harvests in excess of 350 million tonnes, barely sufficient to meet the domestic demand for sugar.

In all likelihood, actual cane harvest by October this year will fall short of the target of 355 million tonnes. So, sugar market fundamentals will remain tight even in 2017-18 with clear propensity for prices to test higher levels unless the availability of the sweetener is augmented.

The author is a global agribusiness and commodities market specialist

Read the rest of this article by Signing up for Portfolio.It's completely free!

What You'll Get

This article is closed for comments.
Please Email the Editor