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In the past month, contrary to conventional wisdom, given the worry of an erratic monsoon and its negative impact on the kharif crop, the prices of a majority of agricultural commodities have declined.
India Meteorological Department has estimated the rainfall in June at the lowest in 10 years but has forecast a revival in the coming week.
"Fear of a negative impact in agri crop productivity have got nullified with expectation of a revival in monsoon rain and the higher production last year. In most cases, traders square off their positions even with marginal profits, amid expectations of a change in monsoon behavior and government intervention," said Ajitesh Mallick, an analyst with Religare Retail Research.
Ram Vilas Paswan, the Union food minister, had reiterated on Thursday that the government would not allow prices of agri commodities to move up abnormally and spur inflation. The government has re-imposed a minimum export price on both onion and potato, to raise their domestic availability. Prices of both had since declined.
The third advanced estimates presented by the ministry of agriculture in May showed rice production at 106.29 million tonnes in 2013-14, as against the final estimate of 105.24 mt for the previous year. Maize production is estimated at 24.19 mt in 2013-14, compared with 22.26 mt earlier. The output of ragi, a fully kharif crop, is expected to be 1.88 mt in 2013-14, compared with 1.57 mt the previous year. Coarse cereals showed a big increase.
Skymet, the private weather forecasting agency, has estimated a 40% cumulative rain deficit in June, affecting central and northwest India badly.
"Prices of agri commodities remained under pressure because of the lack of full information about the impact of erratic monsoon. Foodgrain production was a record high last year but beyond a point, the government cannot control a price rise driven by the demand-supply equation," said Madan Sabnavis, chief economist, CARE Ratings.
