The Hindu Business Line : Crop estimation process still proving tricky

THERE has always been an element of doubt about the credibility of crop estimates issued by various industry and trade associations, especially in the oilseeds sector. For years, speculators have had a field day taking advantage of misleading crop figures. Often, farmers have been at the receiving end.

A sharp downward revision of soyabean crop estimate for the 2004-05 season just announced by the Indore-based Soyabean Processors' Association of India (SOPA) further exposes the hollowness of the trade's estimation process.

SOPA has announced revised crop estimate of 58.5 lakh tonnes for the 2004-05 season, disclosing an uncomfortable and alarming decline from 72.1 lt production estimated at the beginning of the season (mid-October last year).

In October, the area coverage was said to be 74.5 lakh hectares which has now shrunk to 72 lakh hectares.

The revised crop size is attributed to weather aberrations and uneven growth across regions.

In Madhya Pradesh, the output has been scaled down to 34.7 l.t. from the earlier 41 l.t., while in Maharashtra the crop size is down to 17.1 l.t. from 23.7 l.t. Rajasthan is marginally lower at 4.2 l.t.

Interestingly, even the US Department of Agriculture, which is generally known to estimate crop size more or less correctly after talking to a large number of players in the market, fell for the high production estimate issued by SOPA in October last.

Admittedly, crop estimation is a tricky business, especially under the prevailing conditions in our country where farms are fragmented.

Crop estimates are generally given out on the basis of traders' predilections and not on the basis of extensive field visits by experts or through scientific estimation process. There would always be scope for correction.

The Government too comes out with crop estimates, indeed four times for a season.

But the country's soyabean trade is known for creating a hype about the crop size at the beginning of the season so as to depress bean prices and benefit as a result; and then reduce the crop size after a considerable part of the crop is marketed.

Unlike last year (2003-04) when soyabean growers realised attractive returns thanks to firm prices due to a global shortage, this year the bean market is rather soft because of a bumper harvest around the world.

In addition to global price pressure, growers here have had to face the brunt of exaggerated crop estimate issued by SOPA at the beginning of the season. There is another side to this story. The MSP for soyabean this season is Rs 10,000 a tonne.

Despite a fall in average realisation this season to about Rs 12,000 a tonne, farmers are still better off because of a 20 per cent premium over the MSP. This is a consolation.

An increase in MSP year after year coupled with price premia enjoyed by soyabean growers here (resulting from excess processing capacity chasing limited output) in recent years has meant that producers continue to be insulated from global influences.

The price expectation of growers here has become unrealistic, and unrelated to international market conditions.

It may not be possible to sustain this for long. There are tremendous pressures on the Government both from within the country and outside to open up oilseed imports.

As the representative body of processors, SOPA must assume responsibility to ensure that Indian soyabean becomes globally competitive.

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