Foodgrain output fall may push up prices

http://www.deccanherald.com/content/280758/foodgrain-output-fall-may-push.html

New Delhi, September 24, 2012, DHNS:

Lesser yields of cereals, pulses cause worry

After the hike in diesel price, brace up for increase in food prices, thanks to an expected shortfall in foodgrain production this kharif season.

The deficient monsoon may result in lower production of foodgrain during kharif season by 1.68 million tonne. Production of coarse cereals, pulses and oilseeds during the kharif season is estimated to be lower than average. However, production of rice is estimated to be slightly higher than average. Last year, rice production was lower than average.

“As per the first advance estimates of production, 117.18 MT foodgrain is likely to be produced in the kharif season of 2012-13,” Agriculture Minister Sharad Pawar said on Monday while addressing state and Union government officials and farm scientists.

But Pawar did not mention the impact of the shortfall in food production on inflation.

Several economists, contacted by Deccan Herald, said food prices will definitely go up.

Brinda Jagirdar, economist at State Bank of India, remarked: “The pressure on overall prices will be felt but it will be more on the food prices, which is already in double digit.

But we have to see how manufacturing and the core inflation behave in the coming months. If that eases, there may be some relief felt by the RBI while deciding on rate cut in the next policy move in October.”

N R Bhanumurthy, Professor at National Institute of Public Finance and Policy, agreed: “It is no surprise that food prices will go up. Whenever there is a fall in production, it happens. But, the prices in futures markets have already gone up anticipating a fall in kharif supply and when this translates into spot prices, we can expect a pressure on food commodities in the coming two-to-three months.”

But there is one silver lining. Delayed rainfall may augur well for the rabi crops and the Centre has asked the States to encourage farmers to sow timely to reap the benefit of available soil moisture.

Compared to the last five years’ average final estimates of 118.86 MT, the current projections are lower by 1.68 million tonne or about 1.4 per cent, because of deficient and late rains this year.

Pawar said the production estimates might be lower than the last year, but higher than the average production of 113 MT in the last five years.

“Whatever shortfall we have seen in the kharif season will be covered in the rabi,” said Pawar.

The agriculture ministry noted that the widespread rains in the current month were enough to recharge the soil profile in rainfed areas adequate not only for germination of the seeds, but also to sustain the plant growth till the post rainy season rains in November or winter rains in December-January.

The production of rice during the kharif season has been estimated to be 85.59 MT, lower than last year’s record production of 91.53 MT. Pawar, however, pointed out that even after shortfall, the production of rice was expected to be higher than the average of 83.27 MT.

However, the estimated production of coarse cereals is lower than average production by 3.65 MT, mainly due to loss in area coverage under bajra and maize in Karnataka and other states like Gujarat, Haryana, Maharashtra and Rajasthan.

Production of kharif pulses is also estimated to be lower than average production by 0.45 MT, mainly due to shortfall in moong. Though projected production of soyabean has shown an upward trend, total production of kharif oilseeds has been estimated to be 18.78 MT, lower than the average production by 0.61 MT, primarily due to decline in production of groundnut.

The current year’s production of sugarcane estimated at 335.33 mt is higher by 10.22 mt as compared to the average. The estimated production of cotton at 33.40 million bales is higher than average by 5.32 million bales.

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