Demand will be key to strong recovery in the farm sector going forward

Unless demand picks up, it will be difficult to absorb all the surplus output, especially in crops that aren't procured by govt, are largely consumed in processed form, or are exported

Buoyed by good soil moisture, Purshottam lal, a middle-aged farmer from Harda district of Madhya Pradesh had planted summer-moong crop in a big way, braving the Covid lockdown in early April.

Much to Lal's relief, the crop came out satisfactorily, as availability of seeds, fertilisers and other vital inputs were patchy in the initial days of lockdown.

But then the unexpected happened. Moong prices crashed from a high of over Rs 6,500 a quintal, to Rs 4,500-5,000, almost 42 per cent lower than the minimum support price set in 2019-20.

Lal’s hopes of making a good profit from his inter-crop of summer-moong that he grew between rabi harvest and kharif sowing were dashed just as he took his produce to the market.

For millions of farmers like Lal, a good harvest does not always translate into a higher return on investment, particularly in crops that have limited public procurement.

This is a fact that needs to keenly watch as India once again gets ready to harvest a bumper harvest in the coming kharif season.

If the pace of sowing of kharif crops is any indication, India’s kharif harvest in 2020-21 is expected to set another record.

Interestingly, sowing of summer crops also hit a record high this year, at more than 39 per cent over the previous year. Summer crops are known as inter-crops and are sown in the period between rabi and kharif.

While the area under pulses (largely summer-moong) crop in Madhya Pradesh and Uttar Pradesh rose sharply over last year, the bumper harvest did not exactly translate into higher returns for farmers.

Maize farmers in Bihar are suffering a similar fate as their rabi harvest is fetching a price sharply lower than the state-mandated MSP.

Maize prices in Bihar have slumped to Rs 1,100-1,300 a quintal, almost 30-40 per cent lower than the 2019-20 MSP of Rs 1,760 and just half the price the crop was quoting last year.

Bihar accounts for almost 80 per cent of the 6-7 million tonnes of the country's rabi maize output.

Farmers had planted huge quantities of the crop this rabi season.

First, falling demand from the poultry industry and later the decision to import maize dampened sentiments.

India produces around 28-29 million tonnes of maize a year, of which 6-8 million tonnes come during the rabi season largely from Bihar, while the remaining is grown during the kharif season.

Clearly, when it comes to agriculture, just producing more isn't enough and doesn't guarantee a revival in rural incomes unless matched by an equal rise in demand that leads to good prices for farmers.

Sowing so far 

Sowing of kharif maintained a brisk pace during week ended July 10, as seen in the previous weeks as well, boosted by an upsurge in southwest monsoon so far.

In June, this year, India as a whole received 196.2 millimeters of rainfall, which is 18 per cent above normal. The maximum rainfall was in Central India during this period.

Data showed that in June, Central India received 220.9 millimeters of rainfall that was 31 per cent above normal.

North-West India received 77.9 millimeters of rainfall, or 4 per cent above normal for the month June.

In North India, data showed that among the big agricultural regions, western UP alone recorded a 31 per cent drop in rainfall in June while in most other areas  it was higher than normal.

Meanwhile, South India received 172.6 millimeters of rainfall in June, eight per cent above normal.

Encouraged by this, farmers planted all kharif crops in around 58 million hectares till July 10, or 44.13 per cent more than last year.

Within this, acreage under paddy was 26.16 per cent beyond last year's area, at 12 million hectares, while that of pulses 162.35 per cent more than last year, at 6.42 million hectares.

Oil seeds acreage was 85.16 per cent more than last year till Friday, at 13.93 million hectares, while the area under cotton was 35 per cent more than last year at 10.48 million hectares.

The devil is in lack of demand 

A good harvest alone does not lead to higher returns for farmers and unless demand picks up, it will be difficult to absorb all the surplus output, especially in crops that aren’t procured by the government, are largely consumed in the processed form, or are exported.

For example, in the case of edible oils, bulk consumers such as hotels, restaurants and dhabhas consume almost 20-30 per cent of the total annual availability consisting of both domestic output and imports.

In the absence of strong demand from them, the overall consumption has gone down which will get reflected in oil seed prices as well, in the coming months.

Davish Jain, chairman of Soybean Processors Association of India, recently told news agency Reuters that a bumper soybean crop expected in the coming kharif season will put additional pressure on local soybean prices as the country is expected to start the new marketing year with carry-forward stocks of 1.28 million tonnes, up from 170,000 tonnes a year ago.

"Local demand is weak and soymeal exports are not picking up. The government needs to restore 10% incentive for soymeal exports to support soybean prices," Jain said.

Despite, the government lifting the lockdown from almost all segments if there isn’t strong economic recovery; demand will continue to remain subdued and will have a cascading impact on agriculture produce as well.

While some people say food demand is inelastic and essential in consumption, when the overall economic growth is projected to remain negative in 2020-21 and there is a big cloud over income and jobs, demand can’t remain untouched. 

And, this is true for other components of the farm sector as well, be it livestock, diary or fisheries. 

A way out of this is a big boost from the government in rural and urban areas, but given the stretched financial position of the government, it will be interesting to watch how and from where this push will come. 

Kharif acreage till July 10 (in million hectares)

Crops  2020-21  2019-20  % increase

Paddy 

12.00  9.57  26.16 Pulses  6.42  2.44  162.35

Coarse Cereals 

9.32  7.19  29.57

Oilseeds 

13.93  7.52  85.16

Cotton 

10.48  7.77  35,00 Total  58.00  40.25  44.13 Source: Ministry of Agriculture

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