Dry spell threatens summer crops with low yield, could worsen farmer woes

Poor output of crops could raise food prices, restricting central bank from cutting lending rates

Farmers in India run the risk of planting too much, too fast in the current monsoon season as an unexpected dry spell starts to wilt summer-sown crops, raising fears of lower yields and potentially forcing some farmers to re-sow crops.

Lower yields or crop failure will increase discontent among farmers that has triggered protests in the big agrarian states in recent months and forced the state governments to waive billions of dollars of farm loans.

The ongoing dryness is affecting central, western and southern India, key producing regions for cotton, soybean, corn, sugarcane, pulses and rice.

Poor output of summer crops could also raise food prices, restricting the central bank from cutting lending rates, crucial to boosting Asia's third-biggest economy.

"Farmers sowed crops on time, but now they will wilt unless rainfall revives in next few days," said Faiyaz Hudani, deputy vice president at Kotak Commodity Services Pvt Ltd.

"In some regions, farmers will have no option but to re-sow crops."

A heavy downpour early last month had lifted the rain surplus to 10 percent in first half of June, raising farmers' hopes of a good June-September monsoon season as forecast by the state-run India Metrological Department (IMD).

But rains are now 1 percent below normal, with the deficit as high as 35 percent in some regions, weather department data shows.

The monsoon delivers about 70 percent of India's annual rainfall, critical for the farm sector that accounts for about 15 percent of India's $2 trillion economy and employs more than half of its 1.3 billion people.

Forecasts of normal monsoon rains prompted farmers like Hanmant Mujalge from Nanded district in the western state of Maharashtra to cultivate black gram on 5 acres (2 hectares) in mid June. But the dry spell wilted germinated seedlings and forced Mujalge to plough land and prepare it for re-sowing.

"I want to sow again once we get rainfall, but I don't have money to buy seeds," he told Reuters by phone.

Indian farmers had initially rushed to sow seeds after ample rains, bringing total planting levels to 40.43 million hectares by July 7, up 9 percent from a year ago.

"In two days rainfall is likely to revive in central India that badly needs rains," said a Pune based official with IMD.

A drop in output of summer-sown crops could lift overseas purchases of edible oils and pulses by India, the world's biggest importer of both, while limiting its rice and cotton exports.

"Due to the consecutive droughts and demonetization farmers income was curtailed in the last three years. This year they badly need good rainfall," said Kotak's Hudani.