Food may get costlier as global prices, kharif yield to hit household spends – business news

A smaller kharif or summer crop, surging agricultural imports, and higher global food prices are likely to keep household food spending high in 2020, with the good news being that these will translate into higher farm incomes, according to analysts.

The June-September monsoon started sluggishly, delaying sowing, ended with a 10% surplus, as heavy rains flooded 12 states, damaging a variety of kharif or summer-sown crops, and then withdrew later than usual (and abruptly). Experts say this will reduce output, resulting in an increase in wholesale prices.

“Overall kharif output is expected to be 4-6% lower in crop year 2019-20. Mandi prices have already shown an upward trend in the last few quarters,” said economist Hetal Gandhi of CRISIL.

Farm incomes are already up 26% compared to last kharif, according to an estimate by the ratings firm CRISIL Ltd. Overall farm profits per hectare will grow 7-9% in crop year 2019-20 (April 2019 to March 2020), the ratings firm CRISIL Ltd said, based on its analysis of 15 key minimum support price (MSP)-linked crops. MSPs are federally fixed floor rates aimed at preventing distress sales by farmers.

Poor farm incomes last year, on the back of a glut and lower global prices, triggered massive countrywide protests by farmers.

Several states, including Andhra Pradesh, Assam, Bihar, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Odisha, Punjab and Uttar Pradesh, experienced flooding this summer. This adversely impacted not just output of onions, but also that of soybean, groundnut and pulses, such as urad and tur.

But prices have consequently moved in the opposite direction.

Gandhi’s analysis showed prices of pulses and oilseeds increased 23% and 8%, respectively, from the third quarter of 2018 to the fourth quarter of 2019. The comparison period does not correspondent because of delayed market arrivals in 2019 due to untimely rains.

“Prices of cereals and coarse cereals inched up 13% on average because of an 11% increase in paddy prices supported by higher MSP and over 25% increase in weighted average prices of coarse grains because of high domestic demand,” Gandhi said.

The price increase seems to have offset the effect of lower output.

“A large part of my oilseeds acreage suffered damage, prices are higher by 16-20%, which has made up for the losses,” said Jogesh Inamdar, a farmer associated with the Swabhimani Shetkari Sangathana, a farm organization from Nashik.

Lower output isn’t the only reason for relatively higher food prices. India’s net export of food items, i.e. the value of exports minus value of imports, is falling. This means the country is importing more food items to meet domestic demand. Total agricultural exports during April-September were about 9% lower at $17.29 billion compared to $19.02 billion during the same period in 2018-19, official data shows.

Summer output of soyabean is estimated to be around 12.15 million tonne, 12% lower than the last year’s production, Skymet Weather Services, a private weather and agri-risk solutions firm, said in a report.

While rice production is likely to be lower by 12% at around 90.04 million tonne, pulses production is estimated to be around 82.02 million tonne, 4.5% down from last year’s output of 8.59 million tonne.

The country’s Consumer Price Index inflation spiked to 5.54% in November 2019, the highest in nearly three years, while retail food inflation surged 10% in November compared to a 7.89% rise in the previous month, according to the latest data.

In a note, CRISIL Ltd said higher MSP and government support for wheat (which accounts for over 50% of the rabi or winter crop output) is expected to “aid price growth for rabi, leading to an expansion in the overall per-hectare farm profitability in crop year 2019-20”.