Commodities

Farm output rebounds, but no price relief seen

G. Chandrashekhar Mumbai | Updated on February 16, 2011 Published on February 16, 2011

Farm output rebounds... Photo: Ashoke Chakrabarty   -  Business Line

Given the latest farm output numbers and even assuming that they are not going to be revised downward substantially in the next round, there is nothing to suggest that food inflation is going fall anytime soon.

Despite the fact that farm output in 2010-11 has rebounded from the previous year as borne out by the second advance estimate of 2010-11 crop production released recently by the Ministry of Agriculture, there is nothing to feel euphoric or smug about.

If anything, global and domestic market signals point to need for continued caution on the food price front and no let up in control measures.

The star performer of the year is, of course, pulses, production of which for the first time in recent memory is set to achieve the annual target of 16.5 million tonnes (mt). Yet, concerns remain. For instance, rabi season pulses output, estimated at 10.1 mt, is short of the season's target of 10.8 mt.

Major rabi pulse, chana (gram) has fallen short of the target of 7.6 mt with output estimated at 7.4 mt. Urad, moong and others account for the rest (2.7 mt).

Weather effect unclear

Actually, it was kharif output (6.4 mt versus target of 5.7 mt) that contributed to the improved performance. Also, it is unclear if the effect of recent weather disturbances in Madhya Pradesh has been taken into account.

Production of wheat, planted on a record 29.1 million hectares, has been estimated at 81.5 mt, close to the target of 82.0 mt. However, industry and trade representatives do not share the Government's optimism about the crop size. To be sure, the crop in the making is not without concerns in the next few weeks. Weather, especially temperature, is likely to influence yield. It should not be a surprise if the output estimate is pared down in the next round.

Like in kharif season, rabi rice too has fallen short of the target of 15 mt by a good 1.2 mt (13.8 mt) and, therefore, the annual target of 102 mt has remained elusive again with total output estimated at 94 mt.

This is sure to result in tightening stocks and firm prices. Permission to export specified varieties of non-basmati rice under a limited ceiling is also a bullish factor.

Oilseeds and coarse grains crops have also rebounded from last year, but have still fallen short of target. At 40.1 mt, coarse grains are a good 10 per cent below the year's target of 44 mt, while oilseeds have fared poorly with output (27.8 mt) trailing annual target (33.2 mt) by a good 20 per cent.

Nothing to rejoice about

Overall, there is nothing to feel euphoric about 2010-11 farm output, except that cotton has done exceedingly well; but the fibre's trade policy has got mired in interdepartmental squabbles and pressure from user industries. The country has failed to draw the full benefit of record global prices.

The current year's farm performance raises serious doubts about the rationale and manner of fixing annual targets and strategies adopted for achieving them. Importantly, someone within the Government should be held accountable or responsible for the performance.

Given the latest farm output numbers and even assuming that they are not going to be revised downward substantially in the next round, there is nothing to suggest that food inflation is going fall anytime soon. There will surely be a respite when harvest pressure builds, but it would be temporary. Importantly, global cues are not consumer-friendly. Weather in some of the agriculturally important countries is far from benign.

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Published on February 16, 2011
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