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Cereal prices move up on lower Kharif output, changing consumption patterns

Huge stocks lying with FCI limit increase in rice, wheat prices; coarse grains costlier by up to 16% during the past one month

Dilip Kumar Jha  |  Mumbai 

FAO estimates higher cereal output
Photo: Shutterstock

After vegetables, it is the prices of cereals that have started moving up due to expectations of lower kharif output, following crop damage caused by excess rainfall this year, and higher demand brought on by changing consumption patterns.

While the price rise in the main cereals such as rice and wheat was marginal due to the availability of huge stocks with the government-owned (FCI), coarse grains have become costlier by up to 16 per cent during the past one month on forecasts of lower output this year.

Jowar surged by 16 per cent in the benchmark Kekri (Rajasthan) market to trade at Rs 1,890 a quintal on Friday, from Rs 1,630 in early November. Bajra and ragi prices moved up by 3.3 per cent and 12.7 per cent, respectively, during the same period.

The price of wheat moved marginally up to trade at Rs 1,990 a quintal in Pichhour (Madhya Pradesh) mandi, while rice in Pilibhit (Uttar Pradesh) has become cheaper by 3.1 per cent to trade at Rs 2,520 a quintal. With the prices of most food items including vegetables such as cucumber, carrot and ginger, and coarse grains having moved up significantly, consumers are likely to face a pinch in their overall kitchen budget.

“Coarse grain production may decline this year due to crop damage caused by excessive rainfall in major growing regions. What's more, there has been a sharp increase in their demand over the past few years, as consumers are becoming more health conscious. With supply getting reduced and demand increasing, coarse grains prices are firming up. It is basically a demand-supply fundamental that is drivingh coarse grain prices,” said Madan Sabnavis, Chief Economist, Care Ratings.

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Apart from coarse grains, vegetable prices have doubled in the past six to eight weeks on reduced supply, following crop damage in major growing regions.

Many agrarian states such as Maharashtra, Madhya Pradesh, Punjab, Uttar Pradesh and Bihar were flooded during the plant germination stage, resulting in lower agriculture yield, damage and delay in harvesting of kharif crops. All these factors hampered the supply of coarse grains and vegetables during the festive season and continued thereafter.

“Rainfall in the country as a whole has remained above normal (10 per cent above the benchmark long-period average, or LPA). Despite the late arrival of the monsoon this year, which led to weeks of dry spell till late June, rainfall remained above average in the subsequent months (till September). Due to heavy rains across the western and central regions, acreage of certain crops shrunk. Overall, while the kharif season took a hit from excessive spells of rainfall, higher storage across reservoirs bodes well for the upcoming rabi season,” said Rohan Gupta, an analyst with Edelweiss Securities Ltd.

However, prices of rice declined, while wheat remained flat. There has been no report of paddy crop damage despite the fact that devastating floods hit other crops. But the Union Ministry of Agriculture in its first advanced estimates forecast India’s rice output at 100.35 million tonnes for Kharif 2019, a marginal decline from 102.13 million tonnes reported in the fourth advanced estimates for 2018-19.

During November, total food grain storage in FCI’s godowns was reported at 60.48 million tonnes this year, up 20 per cent from 49.39 million tonnes the same month last year. FCI procures food grains for market intervention in case prices start overheating.

Agriculture experts estimate a better winter crop this year, with the late season rainfall leaving adequate soil moisture for improved rabi sowing. Rabi season contributes to nearly 10 per cent of India’s overall rice output. Experts also estimate a bumper wheat output this year on favourable climatic conditions.

“Rice prices have declined due to unfavourable government policies. The governments of various agrarian states, including Punjab and Haryana, have levied taxes on farm produce, which created undue competition among growers,” said Vijay Setia, former President, All India Rice Exporters Association (AIREA).

First Published: Mon, November 25 2019. 16:56 IST
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