Agri prices to rise by 10-12% in 2019 on lower kharif crop output estimates

Crisil Research forecast kharif crop output to decline 3-5% on uneven distribution of rainfalls

The research wing of ratings agency CRISIL thinks prices of agricultural commodities are likely to rise by 10-12 per cent this year, on lower output estimates following crop damage due to excess rain in some areas and deficiencies elsewhere.

While sugar prices are likely see an uptick on lower output and diversion of cane for biofuel production, other commodities -- soybean, jute, paddy -- are likely to remain firm.

A proportionate jump in food inflation is thought unlikely, due to subdued global prices and abundant buffer stock for state intervention in case of a price rise. India’s food inflation has been somewhat muted for several quarters. 

After three years of growth, kharif output is likely to decline by three to five per cent this season. The southwest monsoon was erratic, from being 30 per cent deficient in June to a surplus in August, with uneven distribution. CRISIL estimates kharif crop output at 162.2 million tonnes, from 170.7 mt the previous year. 

Delayed onset of the monsoon had led to a 6.4 per cent decline in paddy sowing by August 22. Paddy accounts for a little over 30 per cent of kharif season acreage. However, the area under cotton and maize should be higher, as higher prices last year had encouraged farmers to sow more.

Floods in Maharashtra, Odisha and Andhra, besides weak rain in West Bengal and the Marathwada region of Maharashtra, are expected to affect the kharif crop. High-intensity rain in August is likely to increase pest attack on maize and paddy.

Dharmakirti Joshi, chief economist at CRISIL, said: “The quick catch-up in the southwest monsoon has meant excess rain in August in a few sub-regions. This has affected kharif crops, particularly paddy. But, abundant rains have also improved chances of healthy rabi production because of recharging of groundwater resources and higher reservoir levels.”

By the end of August, the cumulative rainfall was one per cent above normal, one of the best in six years in terms of the long period average. 

Hetal Gandhi, director of CRISIL Research, said at a webinar here on Thursday that lower kharif output is expected to push up wholesale prices, boosting the profitability of most crops. 

“Normal rainfall in the country with even distribution is a positive for the economy but with 25 per cent of subdivisions recording excess rain, coupled with 20 per cent recording deficient rain, there could be an impediment in the sowing pattern. There are reports of some crops being affected negatively due to flooding,” said Madan Sabnavis, chief economist at CARE Ratings.