Can allied sectors save agriculture from the blushes in FY24?

Earlier this month, India’s first advance estimate of GDP for FY24 pegged growth for crucial agriculture and allied activities at a dismal seven-year low of just 1.8 per cent.

The low growth is largely due to a poor monsoon in 2023, which was the first cumulative 'below-normal' rains in India since 2018.

The uneven southwest monsoon ensured that production of almost all kharif crops was down in 2023-24. The initial sowing of some rabi crops like chana has also been impacted because of deficient soil moisture.

However, some experts said the GVA numbers could stand to be revised as the initial estimates are based on extrapolation of figures for five-six months, and a final picture will emerge only around February.

But many also felt that the numbers could go even further down revision when the full impact of low rains is materialized on the crop numbers.

According to the first advance estimate of crops released a few months back for 2023-24 season (July to June), production of rice, the biggest cereal grown during the kharif season, could drop by 3.79 per cent in 2023-24 season to 106.31 million tonnes as compared to the 110.5 million tonnes as per the final estimate of 2022-23.

Not only that, but the estimates also showed that production of all major kharif crops this year could see a dip, with moong, urad, soybean, and sugarcane leading the pack.

On rabi acreage, the latest data showed that till January 12, 2024, sowing was marginally down by less than a per cent to 67.34 million hectares, mainly due to a drop in acreage under chana.

However, some experts felt that the sharp decline in agriculture GVA in Fy-24 is not just due to the dismal performance of the crop sector; even allied activities such as livestock, forestry, logging, fishing and aquaculture could witness a decline.

“This is because when monsoon is uneven and reservoir levels are low, fodder availability suffers which could have led to drop in the growth of sectors allied to agriculture as well,” Madan Sabnavis, chief economist at Bank of Baroda said.

Since 2012-13, growth in livestock, fishing, and aquaculture has traditionally been higher than in the crops sector (the segregated data is available till 2021-22).

The big question is whether the allied sector will come to the rescue of agriculture GVA in Fy-24 as well as it has done in the past.

Like in 2018-19, when the crop sector registered a negative growth (-2.4 per cent), but strong growth in livestock (8.7 per cent), forestry and logging (7.6 per cent) and fishing and aquaculture (8.5 per cent) saved the day. Overall GVA of agriculture and allied sector rose by a respectable 2.1 per cent.

So how does the non-crop sector production look like in Fy-24? Absence of updated robust data is a big hindrance here but nonetheless, some trends are visible.

In Fy-24, milk production has come back to normal after a dismal last three months (Jan to March) in Fy-23.

INfact, milk markets underwent a complete ‘U’ turn in a span of just a few months in Fy-24.

From staring at a shortage of milk products like butter and ghee in the months of January to March 2023 igniting the prospects of imports, the country was looking at steady supplies by the time monsoon came in July, which softened procurement prices in several centres.

This somewhat eased the crisis situation that milk and dairy companies were staring at just at the start of financial year Fy-24.

By July, average buffalo milk procurement price across India softened to around Rs 52 a litre which in the months of January to March had shot up to 54-55 a litre (a drop of 3-5 per cent).

Similarly, cow milk prices had come down to around Rs 33 per litre which in the January to March period had shot up to Rs 37-38 per litre (a drop of 10-13 per cent).

Milk industry veterans point towards a couple of factors for this ‘U’ turn.

They said milk supplies which were expected to fall during the lean months starting roughly from April to September 2023 didn’t materialize.

And, the flush season that ideally should have ended with the advent of summer got extended.

A prime and big reason for this turnaround was the summer months of 2023 weren’t hot enough.

An analysis by the state-run India Meteorological Department (IMD) showed that from March to May of 2023, cumulative rainfall across the country was excess as a whole except in east and Northeastern parts of the country where it was deficient.

As against a normal of 115.9 millimetres of rainfall between March to May, the country received 12 per cent more rainfall in 2023.

More importantly, the IMD analysis showed that no part of India got any major heatwave spell this summer, barring West Bengal from April 11-19.

In a normal year, according to met department officials, usually, around 10-15 heat waves occur over North-West India in April-June, while the same number is 5-7 over East India, followed by 3-4 in Southern Peninsular India

Back-to-back western disturbances and other weather patterns caused hailstorms, rains and other events that kept the climate relatively cool in the summer months of 2023.

A cooler climate meant that demand for milk products and value-added items such as buttermilk and ice creams did not show the exponential rise it usually sees in summer months.

Industry players said the spike in demand for festivals and marriages was usually not abnormal in these months.

Net-net milk markets have been relatively well supplied in the summer months.

Another factor, which several milk sector players point to for easing supplies is the virtual absence of milk exports from India in FY24.

Thereafter, the flush season which started from October 2023, has also been normal with supplies coming back to their usual as was the few years back.

In 2022-23, milk production in the country had slowed down due to an outbreak of the lumpy skin disease among cattle. According to a reply by the Central government in Parliament a few months back.

The government said the annual growth rate of milk production in the country came down to 3.83 per cent in 2022-23 from 5.77 per cent in 2021-22, all because of lumpy.

Now coming to eggs production, Rickey Thaper, treasurer, poultry federation of India said eggs production is increasing every year by 6-7 per cent so much so that we are now also exporting eggs.

Hence, there is no question of any drop in output.

However, some recent media reports said that in Andhra Pradesh, which is one of the largest egg-producing states in the country, output has come down by almost 15 per cent in 2023 due to high feed costs and prolonged losses to the industry.

Thaper said that demand for poultry feed in the country has been rising at around 8-10 per cent annually over the last decade.

Feed, which constitutes around 65 -70 per cent of the cost of the production, consists of mostly maize and soybean meal (SBM).

At present, 60 per cent of maize production in India is used as feed, with 47 per cent of maize production going towards poultry and 13 per cent for cattle feed.

“However, the rate of growth in poultry meat and chicken production has surpassed the growth in maize and soybean output. To protect the interest of the domestic producers, the major national and regional poultry associations have asked the government to allow imports of GM Maize and Soybean because of ‘unprecedented increase’ in feed prices,” Thaper said.

He said while the production of crops has been rising at a rate of 1.5-2 per cent annually, that of eggs and broilers has been rising at a rate of 6-9 per cent per annum.

How much of these past trends will be maintained in FY24? Only updated data will tell which would also determine whether the current fiscal turns into one of the lowest growth rates in the last seven years for agriculture and allied sectors or if there is some saving grace.