Global prices, kharif yield to hit household spends
NEW DELHI: A smaller kharif or summer crop, surging agricultural imports, and higher global food prices are likely to keep household food spending high in 2020, with the good news being that these will translate into higher farm incomes, according to analysts.
The June-september monsoon started sluggishly, delaying sowing, ended with a 10% surplus, as heavy rains flooded 12 states, damaging a variety of kharif or summer-sown crops, and then withdrew later than usual (and abruptly).
Experts say this will reduce output, resulting in an increase in wholesale prices. “Kharif output is expected to be 4-6% lower in crop year 2019-20. Mandi prices have already shown an upward trend in the last few quarters,” said economist Hetal Gandhi of CRISIL.
Farm incomes are up 26% compared to last kharif, according to an estimate by the ratings firm CRISIL Ltd.
Overall farm profits per hectare will grow 7-9% in crop year 2019-20 (April 2019 to March 2020), the ratings firm CRISIL Ltd said, based on its analysis of 15 key minimum support price (Msp)-linked crops.
MSPS are federally fixed floor rates aimed at preventing distress sales.
Poor farm incomes last year, on the back of a glut and lower global prices, triggered massive countrywide protests by farmers.
Several states, including Andhra Pradesh, Assam, Bihar, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Odisha, Punjab and UP, experienced flooding this summer. This adversely impacted not just output of onions, but also that of soybean, groundnut and pulses, such as urad and tur.
But prices have moved in the opposite direction. Gandhi’s analysis showed prices of pulses and oilseeds increased 23% and 8%, respectively, from the third quarter of 2018 to the fourth quarter of 2019.
The comparison period does not correspondent because of delayed market arrivals in 2019 due to untimely rains.
“Prices of cereals and coarse cereals inched up 13% on average because of an 11% increase in paddy prices supported by higher MSP and over 25% increase in weighted average prices of coarse grains because of high domestic demand,” Gandhi said.