Crop production estimates should be more reliable

Are India’s official crop estimates realistic and reliable? This needs to be examined because the last 12-15 months have been rather challenging from an agricultural production and price perspective. To be sure, we are the world’s largest producer of milk and the second largest in rice, wheat, sugar and cotton.

For 2022-23, the government has claimed record production of grains like rice, wheat and maize; oilseeds like rapeseed/mustard; sugarcane; and pulse crops like gram (chana) and moong. Despite the said record production, open market prices of many agri-commodities are at elevated levels much to the discomfiture of policymakers and hurting consumer interest.

To contain high prices of essential food commodities, New Delhi has unleashed a series of steps in the form of curtailment of export trade and imposition of storage limits. The export of traditional agricultural commodities like rice, wheat and sugar has been highly restricted. The Essential Commodities Act has been invoked to impose storage limits on select pulses, wheat, etc.

What’s more, derivatives or futures trading in sensitive agricultural commodities has been suspended for well over a year now, denying all the value chain participants, including the primary producers (growers), a scientific price discovery mechanism.

At the same time, to augment domestic availability, import of certain commodities has been liberalised. Tur/arhar (pigeon pea) and masur (lentil) import is allowed duty-free until March 2024. More recently, customs duty on refined soyabean oil and sunflower oil was reduced.

Tightening supply

Restrictions on export, imposition of storage limits and liberalisation of import all point to tightening supply situation. While demand growth is rather muted given the high food prices and tepid income increases, the problem lies with the supply side as a result of which market prices are stubbornly high.

Market participants are often blamed for the price rise. In official circles, there is suspicion of speculative inventory build-up by some market participants. So, warnings are being issued from time to time against excessive inventory build-up or hoarding.

It is time to actually review the crop production estimates. Are our crop estimates realistic or overstated? Wheat, pulses, oilseeds and sugarcane are possibly good examples of overestimation.

The government released the third advance estimate on May 25 and continues to stick to its production estimate of 112.7 million tonnes for wheat, despite known weather aberrations during the growing period. The private sector sees wheat output in the range of 102-105 million tonnes only.

No wonder, wheat prices spiked above the procurement price and growers were encouraged to sell the produce in the open market. The Food Corporation of India has managed to procure just about 26 million tonnes this season, far below the target of 34 million tonnes. The latest is that market conditions are developing in a manner for New Delhi to consider wheat import by August/September.

Sugarcane crop estimate is alarming too. The cane crop size could at best be in the range of 400-420 million tonnes and sugar production at around 31 million tonnes. But the government has estimated cane output at a massive 494 million tonnes, some 20 per cent above the target. If it was correct, there should be glut of sugar in the country and huge export surplus. But in reality sugar production is down this year by at least 10 per cent and sugar export has been curtailed. Cotton is no different. While government estimate is 34.3 million bales, well below the target of 37 million bales, private estimate of cotton crop is 30-31 million bales. A somewhat similar situation applies to soyabean and pulses too.

A meaningful analysis of data relating to the planted area and rainfall pattern across major growing regions including weather aberrations would suggest that the actual harvest size is likely to be well below the government estimate.

The government’s official estimates do not inspire confidence in market participants. Their trading decisions will be based on their perception of harvest size and not on government estimate. A thorough review of the crop estimation process, consultation with domain experts as well as industry representatives would be in order. Transparency in the estimation process and scientific methodology are called for.

The writer is a senior journalist, policy commentator and agribusiness specialist. Views are personal

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