Agri Business

Despite mild inflation, crops expected to get better prices

Rajalakshmi Nirmal | Updated on August 29, 2019

Representative image   -  Reuters

‘Higher prices will offset low acreage’

While price of some pulse crops moved up in the first half of the year after seeing a sharp slump in last two years, there is renewed pressure on prices in last few weeks with demand failing to recover despite the festival season having started.

Gram (chick pea) is selling at Rs 4000/quintal in Bikaner now, down from levels of Rs 4300/quintal in July and Rs 4700/quintal in May (MSP for Gram is Rs 4620/quintal). In urad, prices in Latur, Maharashtra are at Rs 5200/quintal, down from Rs 5500/quintal in June (MSP is Rs 5700/quintal). Moong prices in Akola are Rs 6000/quintal, down from Rs 6200 in May (MSP is Rs 7050/quintal).

Weak demand

Given the weak demand and higher supplies in the market, it looks like pulses inflation may only slide down in the months to come. Come November, as fresh arrivals begin in tur, urad and moong from Kharif harvests, prices may only drop again. Also, given that the Centre has large buffer with it in pulses, it may be offloading them in the open market in case there any indications of price going up.

With regards to rice, again, there is a large excess stock with the government. If prices inch up in the coming weeks given the poor acreage (down 23 lakh hectares over last year) in the current Kharif season, it may offload higher stocks from its buffer with FCI and keep a check on prices.

Food inflation overall for the rest of the year will be muted say economists also because globally food prices are depressed. Prices of cereals, dairy and sugar have been moving south across markets.

Soft inflation numbers may be comforting consumers and RBI, but one segment of population that has been bearing the brunt of low food inflation have been the farmers. With not much progress seen in many of the key schemes in agriculture including eNAM after the initial phase, what is in store for farmers this year?

Kharif 2019 outlook

CRISIL’s team of experts including Dharmakirti Joshi, Chief Economist and Hetal Gandhi, Director, CRISIL Research, in a webinar today said that the Kharif 2019 season will see five per cent drop in production over last Kharif but that will be offset by higher prices. The trade war between US and China has created good demand for Indian cotton and soya bean and farmers of these crops are likely to see good prices after Kharif harvest, they added. Other crops where prices may scale higher would be – maize, bajra and jowar on short supplies in the market, jute on plastic ban and oil seeds on import duty on palm oil.

To be precise, food grain farmers will see about 7 per cent higher revenue and 11-13 per cent growth in absolute profits over last year, according to CRISIL.

Published on August 29, 2019

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