Bloomberg News

Weakest Monsoon Since 2009 to Shrink India Rice Harvest

July 20, 2012

Weakest Monsoon Since 2009 Set to Shrink India Rice Harvest

Rice planting in India dropped 19 percent to 9.68 million hectares (24 million acres) this year from 12.04 million hectares a year earlier, the farm ministry said July 13. Photographer: Kuni Takahashi/Bloomberg

The rice harvest in India, the world’s second-biggest producer, is set to drop from an all-time high as the weakest monsoon in three years slows planting, potentially boosting global prices. Futures climbed for the first time in four days.

“It will be difficult to match last year’s record rice production,” said Samarendu Mohanty, a senior economist at the International Rice Research Institute in Manila. Output was 104.3 million tons in the year ended June 30.

A 22 percent shortfall in monsoon rains delayed sowing of crops from rice to cotton, stoking a rally in commodity prices and threatening to accelerate India’s inflation that exceeded 7 percent for a fifth straight month in June. Dry weather from the U.S. to Australia has parched fields, pushing up corn, wheat and soybean prices on concern global supplies will be curbed. Costly rice, staple for half the world, may increase global food prices forecast by the United Nations to advance this month.

“The whole grains complex of wheat, corns, soybeans are forcing rice prices higher as well,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity- markets newsletter in Sydney. “Indian production is very important for the market.”

Rice planting in India dropped 10 percent to 14.5 million hectares (35.8 million acres) this year from 16.1 million hectares a year earlier, the farm ministry said today. The country is estimated to export 8 million tons of rice in 2011-2012, according to the U.S. Department of Agriculture, accounting for about 25 percent of the global trade.

FAO Forecast

World grain production will be lower in 2012 than expected a month ago, the United Nations’ Food & Agriculture Organization said July 5. Farmers across the world will harvest 2.4 billion tons of grain this year, 23 million tons less than forecast on June 7, it said. A drop in the Indian harvest “will have an impact on global prices” this year, Mohanty said in an e-mail.

Rice for September delivery rose 1 percent to $15.65 per 100 pounds on the Chicago Board of Trade by 4:50 p.m. in Mumbai. Futures, which reached a two-month high of $15.765 on July 16, have advanced 5.3 percent this year.

A smaller Indian crop and potential curbs on exports may help Thailand, the world’s biggest shipper, boost sales, rice institute’s Mohanty said.

Thailand’s government has bought 9.5 million tons of unmilled rice from farmers between March 1 and July 9 under a state purchase program, the ministry of commerce said July 10.

Export Review

India will review its farm-good export rules after 15 days and consider setting limits on food crops that traders can stockpile to check a rally in prices of oilseeds and grain, Food Minister K.V. Thomas said July 18.

“With the monsoon playing hide and seek, it is a challenge for our farmers and scientists to maintain the food-grain output achieved in last two years,” Farm Minister Sharad Pawar said July 16 in New Delhi. The country won’t ban exports of rice and wheat as it has ample stockpiles, he said.

Monsoon, which accounts for more than 70 percent of India’s annual rainfall, is the worst since 2009 when showers were 22 percent less than a 50-year average. Rainfall in July, the wettest month in the June-September rainy season, may miss a June forecast for a normal rain, L.S. Rathore, director general of the India Meteorological Department, said July 16.

Food-grain production reached a record 257.44 million tons in the year ended June 30 after a second year of normal rains boosted harvests, the farm ministry said July 17. That prompted the government to lift curbs on exports of the grains last year. Non-basmati shipments totaled 5.25 million tons since September, according to the food ministry.

‘Happy Situation’

State reserves of rice are more than double the amount required to run welfare programs and emergencies and the government should take advantage of the price-rally to boost exports, said Atul Chaturvedi, chief executive of Adani Wilmar Ltd. Rice inventory was 30.7 million tons, compared with 26.9 million tons a year earlier, government data showed.

“In this scenario of rising prices, India is actually in a happy situation,” Chaturvedi said. “India should sell more rice and wheat in the global market to benefit from the rally in prices. The government should not ban exports.”

More than 235 million farmers depend on the monsoon for crops such as rice, peanuts, soybean and cotton. Sowing of monsoon crops begins in June and harvesting starts in September.

To contact the reporters on this story: Pratik Parija in New Delhi at pparija@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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