The Hindu Business Line : Farm Ministry's kharif estimate paints gloomy picture

Difficult year
Erratic rains and floods have damaged crops in several parts of the country
Production has fallen and prices have consequently increased
Foodgrains, pulses, oilseeds are all expected to witness an ordinary year

Mumbai , Sept. 20

The first advance estimate of kharif 2006 crops announced by the Ministry of Agriculture gives little cause for cheer. If anything, the crop output numbers should send a bullish signal to the commodity market already in the grip of a speculative fervour.

Shortages and rising prices have put the Government on the mat - prices have to be reined in and supplies have to be augmented.

Weather has not been too kind to the country either. Erratic rains and floods have damaged crops in several parts of the country.

Among foodgrains, production of both rice (76 million tonnes) and coarse cereals (25 mt) is estimated to be lower by two mt each as compared with last year kharif.

In particular, maize (corn) output is down by 1.4 mlt to a recent low of 11.0 mt. Rising demand for maize for food, feed and industrial purposes (starch) is sure to result in tightening supplies and firm prices.

Pulses output

The Ministry's estimate of pulses will have to be taken with a pinch of salt. Overall, there is nothing to suggest that pulses output this season will be more than that last year.

In retrospect, even last kharif's 4.7 mt looks somewhat overstated.

This season's estimate of 5.0 mt may actually turnout to be either as much or somewhat lower that last kharif's estimate. Again, there is unlikely to be any real relief from high prices as too much money continues to chase limited supplies of this essential food item.

Other crops

Oilseeds have performed rather badly.

There is a sharp decline in output to 13.0 mt. In particular, output of groundnut (4.0 mt), the high oil content oilseed, has declined rather sharply by over one-third to one of the lowest levels registered in recent years. Even soyabean output is down marginally, according to the Government; but no one's agreeing with the estimate of 8.0 mt.

Soyabean production estimate of the Government both last kharif and the current is clearly overstated.

Although not officially made, trade estimate could be no more than 7.2-7.3 mlt.

Soyabean's oil content is low (18 per cent max). Sesameseed crop is also hard hit in western parts of the country.

Overall, therefore, edible oil availability from the kharif 2006 crop would be lower by between 8-10 lakh tonnes. To what extent rabi oilseeds crops would make up for the shortfall remains to be seen.

Excellent sub-soil moisture in Rajasthan and Gujarat should provide a good opportunity to raise a large rapeseed/mustard crop by March 2007.

But for now, the country's vegetable oil import requirement for the oil year 2006-07 will increase to over 50 lakh tonnes, up 10 per cent from 2005-06 projected figure of 45 lakh tonnes. Till August, edible oil imports aggregated 34 lakh tonnes.

Success story

Cotton is of course one success story that is playing out consistently for the last three years. Trade estimates point to output of about 250 lakh bales, marginally up from last year's 244 lakh bales.

Despite large opening stocks and comfortable availability, prices are unlikely to collapse because of favourable export climate.

There is a distinct possibility of India exporting about 45-50 lakh bales of cotton.

Sugarcane output

Sugarcane output estimate (283 mt) should be a cause for concern. It is only marginally more than that of last year.

In other words, sugar output in 2006-07 will be little changed from the previous year.

This is quite bullish for the market. If the Agriculture Ministry's crop estimate were taken as correct, sugar prices would flare up sooner than people expect. On the other hand, private estimates point to a crop size about 300 mt sugarcane. Where the truth lies is difficult to state at this point of time.

With the arrival of harvested crops and processing season ahead, for the next two months essential food prices might rule somewhat easy.

But towards end-November or beginning of December, there is the distinct possibility of food related inflation catching up to hurt consumers.

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