Farm output rebounds

| Updated on February 15, 2011

Farm output has rebounded, yet beyond a minor post-harvest reprieve during March and April, there is nothing to suggest a genuine and sustained price relief for consumers.

Without doubt, there has been a welcome rebound in farm production in the kharif and rabi seasons of 2010-11; but any smug feeling over the crop size and price expectation would be wholly misplaced. The base effect explains the high percentage of growth vis-à-vis last year. The second advance estimate of the Ministry of Agriculture, released recently, is the first advance estimate for rabi season crops and is subject to revision. Those in industry and trade do not share the government's optimism, especially over the wheat crop estimate. They see the crop at 80 million tonnes and no more; and chances are they are right. Various crops are still in the cultivation stage and it will be several weeks before wheat, for instance, is harvested. Persisting risks to rabi crops cannot be wished away. Signs of rising temperatures in the northern plains are beginning to cause anxiety. Pulses are, of course, sure to set a new record in output, as widely anticipated. Perhaps for the first time in recent memory, the annual production target is likely to be achieved. Yet, ironically, there will be some kind of a toss-up between wheat and pulses (mainly, gram or chana) in the next few weeks. While wheat thrives in cooler temperatures, pulses need warmth. The rice production estimate for 2010-11, at 94 million tonnes, is far short of the targeted 102 million tonnes. Although rebounding from last year's adverse weather effects, crops such as coarse grains, oilseeds and sugarcane are still below their peak output.

As for food prices, beyond a minor reprieve during March and April, following the harvest and arrival pressure, there is nothing to suggest a genuine and sustained relief for consumers. To be sure, higher farm output usually translates to higher farm incomes and thereby to higher demand for consumption goods, including food. The income elasticity of demand for essential foods of mass consumption is well known. On the other hand, the demand-supply equation for major food commodities are still tight. Edible oil prices are at elevated levels because of international factors. Sugar prices are waiting to cut loose. There is mounting pressure on the government to permit sugar and wheat exports, in addition to rice exports of specified varieties allowed recently under a limited ceiling.

It is unclear if the Government plans to do anything special or different to boost the next kharif output. However, trade policies are turning out to be antagonistic to farmers, as has been proved in the case of cotton, which despite an admittedly record crop has a ceiling imposed on exports. . The stakeholders in the farm sector deserve a far more holistic approach to agriculture and agribusiness policies.

Published on February 15, 2011

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