Farm output growth may moderate, despite good rain

The growth in farm output is likely to decline this kharif season, in spite of being the best monsoon rainfall in six years. As a result, the prices of agricultural commodities are set to remain high in 2011-12.

Overall farm output growth in the kharif harvest season, beginning October, is slated to moderate to three to four per cent, as against 6.6 per cent last year, said a recent study by Care Ratings. This was despite estimates of a record production in rice and wheat, said Madan Sabnavis, chief economist, Care Ratings.

Half the year’s total foodgrain output and two-thirds of oilseeds come from kharif, besides all of sugarcane and fibres. Therefore, it is vital for this monsoon-based set of crops to perform well.

According to the India Meteorological Department, the distribution of rainfall this season was the best in six years. It was normal to excess in 32 of the 36 meteorological divisions across the country; the other four saw a marginal deficit. Rainfall has been 716 mm in these three months, the highest since 2005. The total this season should be 920-930 mm.

Yet, the growth in output will remain lower than last year, said a report by Angel Broking. During 2010-11, total foodgrain production was 241.6 million tonnes, with wheat and pulses touching record highs at 85.9 mt and 18.1 mt, respectively. The fourth advance estimates released by the agriculture ministry says wheat output is estimated to be higher by 5.13 mt this year.

Rice output is forecast at 95.3 mt as against 89.1 mt last year. In 2009-10, total grain output from rabi and kharif was 218.1 mt. The highest production in recent years was 234.47 mt in 2008-09. The output of certain varieties of oilseeds like groundnuts, and that of pulses, is estimated to decline, by more than the rise in output of other commodities like rice, said Sabnavis.

Prices of agri commodities are likely to remain upbeat through this year, due to a significant rise in the minimum support price. The popular Dhaanya index, indicating the most traded agri commodities on the National Commodity & Derivatives Exchange, gained a marginal 0.8 per cent yesterday and recovered from its decline over the past week to close at 1,249.67.

Rabobank, in its monthly report for August, had recently said the strong price support in agri commodities’ markets is expected to continue, due to supportive fundamentals and ongoing investor interest.