The Economic Times-KOLKATA/KOCHI/AHMEDABAD: Food prices may not cool substantially in the coming months as farmers shift from grains and pulses to cash crops like cotton and sugar cane. Acreage in cereals and pulses continues to lag last year's numbers, with only rice being sowed in excess of last year.
Overall acreage for major summer crops has gone up by 3% at 98.3 million hectares over the same period last year. Summer is India's most closely-watched growing season since it produces the bulk of the country's grains, pulses, oilseeds, sugarcane and cotton.
Paddy sowing is up by 12% at 35 million hectare over the same period last year. "Almost 89% of sowing is over and we expect sowing to get complete by August end or the first week of September," said TK Adhya, director of Hyderabad-based Central Rice Research Institute. The government has targeted 102 million tonne of rice output in the crop year ending June 2012, higher than 95.32 million tonne produced in 2010-11.
Paddy is still being sown in major producer Andhra Pradesh due to late arrival of rains. Sowing on around 17.5 lakh hectares has been completed. "Till last week, the total acreage covered was 13.07 lakh hectares. But good rains have helped increase the pace," said Dr P Raghuram, professor of Department of Agri Economics in S V Agricultural College in Tirupati.
Rice cultivation in Andhra Pradesh extended to 20 lakh hectares during the last kharif season. This year, the target is 29 lakh hectares. Usually, paddy sowing gets over by August but this time it has been extended by delayed rains, Raghuram said.
The shift in acreage may impact food prices, said analysts. "With lower production this year, we might see high inflation (in food grains, for sure).
Given the dynamics between acreage and production and production and inflation, with food grain acreage still below last year, we see risks to the degree of moderation that markets have been expecting in December," said Indranil Pan of Kotak Securities in a research report last week.
However, others are taking comfort from the overall good summer harvest prospects. Till the week ended August 24, cumulative rainfall in rain-dependent areas improved to 3.4% above normal from 2.9% above normal in the preceding week. Reservoir levels stand at 71% of capacity.
This has raised hopes of better rural incomes this year. Farm income jumped 32% in the 2010 kharif harvest.
"This should reap a good autumn kharif harvest (7% of GDP) that consolidates rural demand. We also expect a bumper winter rabi crop with the Indus that irrigates the wheat fields in the north running at 37.9% higher than average. Rural support for domestic demand is becoming critical given that our US economists have upped US recession risk to 40% from 35% on Friday. Besides, a good harvest should also douse agflation (and inflation) by late 2011," said Indranil Sen Gupta, Emerging Asia Economist at DSP Merrill Lynch (India) in a report last week.
Area under cotton, which contributes a third of India's agricultural GDP, is up by almost 10% in the current kharif season as higher returns earned during the last year has attracted farmers towards this cash crop.
Till last week, cotton acreage in the country was up to 11.7 million hectares compared to 10.6 million hectare in 2010 in the same period. India's leading producer, Gujarat, has registered an increase in sowing of cotton to 29 lakh hectare against 26 lakh hectare in the last year at the cost of groundnut.
Overall acreage for major summer crops has gone up by 3% at 98.3 million hectares over the same period last year. Summer is India's most closely-watched growing season since it produces the bulk of the country's grains, pulses, oilseeds, sugarcane and cotton.
Paddy sowing is up by 12% at 35 million hectare over the same period last year. "Almost 89% of sowing is over and we expect sowing to get complete by August end or the first week of September," said TK Adhya, director of Hyderabad-based Central Rice Research Institute. The government has targeted 102 million tonne of rice output in the crop year ending June 2012, higher than 95.32 million tonne produced in 2010-11.
Paddy is still being sown in major producer Andhra Pradesh due to late arrival of rains. Sowing on around 17.5 lakh hectares has been completed. "Till last week, the total acreage covered was 13.07 lakh hectares. But good rains have helped increase the pace," said Dr P Raghuram, professor of Department of Agri Economics in S V Agricultural College in Tirupati.
Rice cultivation in Andhra Pradesh extended to 20 lakh hectares during the last kharif season. This year, the target is 29 lakh hectares. Usually, paddy sowing gets over by August but this time it has been extended by delayed rains, Raghuram said.
The shift in acreage may impact food prices, said analysts. "With lower production this year, we might see high inflation (in food grains, for sure).
Given the dynamics between acreage and production and production and inflation, with food grain acreage still below last year, we see risks to the degree of moderation that markets have been expecting in December," said Indranil Pan of Kotak Securities in a research report last week.
However, others are taking comfort from the overall good summer harvest prospects. Till the week ended August 24, cumulative rainfall in rain-dependent areas improved to 3.4% above normal from 2.9% above normal in the preceding week. Reservoir levels stand at 71% of capacity.
This has raised hopes of better rural incomes this year. Farm income jumped 32% in the 2010 kharif harvest.
"This should reap a good autumn kharif harvest (7% of GDP) that consolidates rural demand. We also expect a bumper winter rabi crop with the Indus that irrigates the wheat fields in the north running at 37.9% higher than average. Rural support for domestic demand is becoming critical given that our US economists have upped US recession risk to 40% from 35% on Friday. Besides, a good harvest should also douse agflation (and inflation) by late 2011," said Indranil Sen Gupta, Emerging Asia Economist at DSP Merrill Lynch (India) in a report last week.
Area under cotton, which contributes a third of India's agricultural GDP, is up by almost 10% in the current kharif season as higher returns earned during the last year has attracted farmers towards this cash crop.
Till last week, cotton acreage in the country was up to 11.7 million hectares compared to 10.6 million hectare in 2010 in the same period. India's leading producer, Gujarat, has registered an increase in sowing of cotton to 29 lakh hectare against 26 lakh hectare in the last year at the cost of groundnut.
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