Bloomberg News

Rain-Scarce India Depends on Record Stock to Feed People

August 01, 2012

Crops in India, the world’s second- biggest grower and consumer of rice and wheat, are threatened by the weakest monsoon since 2009 leaving the country’s supplies hinging on stockpiles and measures to bolster supplies.

As many as 400 of the country’s 627 districts have received less-than-average rainfall this year, Sharad Pawar, the farm minister, said in New Delhi yesterday after a government panel on the drought met. The weather may affect the output of rice, coarse cereals and lentils, he said. Rain in the past two months has been worse than in 2009, he said. The precipitation in the June-to-September rainy season three years ago was the third- lowest since 1901, according to the country’s weather office.

Below-average rains in more than 50 percent of the country this year slowed the planting of crops such as rice, cotton, corn and coarse cereals. Droughts from the U.S. to Russia may limit India’s ability to import food crops at low prices this year, according to Espirito Santo Investment Bank research.

“Adverse global weather conditions this year are an added upside risk, though the government’s record-high stock of food grains are a cushion for cereal prices,” Nomura Holdings Inc. analysts Sonal Varma and Aman Mohunta said in a report dated yesterday. The bank raised the food inflation forecast for the 2012-2013 to an average 14.3 percent from 12.8 percent earlier.

The worst U.S. drought in 56 years will cause food-price volatility that may expand hunger among the world’s poorest people, the Washington-based World Bank Group said July 30.

Boosting Imports

The food ministry in India was asked by ministers on a panel yesterday to prepare a proposal to import lentils and distribute them at subsidized rates, Pawar said.

“Increasing imports is the only option to maintain supplies of pulses and edible oil,” said Kishore Narne, head of research at AnandRathi Commodities Ltd. in Mumbai.

Prime Minister Manmohan Singh had been expecting a normal amount of rain to harvest a record grain crop for a third year in a row and to cool inflation, which exceeded 7 percent for a fifth straight month in June. Below-average rain may curb exports of rice, wheat, sugar and cotton and increase imports of cooking oils, Espirito said.

“While inflation in protein items remains elevated due to structural demand-supply imbalances, additional risks to food inflation have emerged from the deficient and uneven monsoon,” the Reserve Bank of India said in a statement yesterday. “This has the potential of aggravating inflation and inflation expectations.”

Export Bans

India extended a ban on exports of sugar, rice, and wheat in 2009 because of below-average rain. Bumper harvests in 2010 and 2011 enabled it to ease the curbs and allow free exports. The government will refrain from banning shipments of food grains and sugar for now because of ample stockpiles, Food Minister K.V. Thomas said July 26.

The monsoon, which brings more than 70 percent of India’s annual rain, has been 19 percent below normal since June 1, according to the India Meteorological Department.

With July being the critical planting month in India, “there may be major negative implications if rains do not pick up,” the World Bank said July 30.

Gujarat, Maharashtra and Rajasthan states with the biggest deficits in rainfall this year, account for about 50 percent of India’s oilseed production, 40 percent of lentils output and over 57 percent of the cotton crop, and the impact of a weak monsoon could be severe, according to Espirito.

Grain Stockpiles

State reserves of rice and wheat climbed 26 percent to 80.5 million metric tons as of July 1 from a year earlier, according to the Food Corp. of India.

Purchases of vegetable oils in the year starting Nov. 1 may exceed an all-time high of 9.5 million tons estimated for this year, B.V. Mehta, executive director at Solvent Extractors’ Association of India, said July 30. Imports of lentils may top 3 million tons in the year through March, said Pravin Dongre, president of the India Pulses & Grains Association. The Asian country is the biggest buyer of palm oil and lentils.

The area under lentils, a major source of protein for India’s majority vegetarian population, fell 18 percent to 6.29 million hectares (15.5 million acres) from a year earlier, the farm ministry said on July 27. Oilseeds were sown over 13.83 million hectares, compared with 13.98 million hectares, it said.

The area under rice dropped 8.6 percent to 19.1 million hectares from 20.9 million hectares a year earlier, according to the farm ministry. Cotton sowing declined to 9.72 million hectares from 10.4 million hectares.

The government approved a subsidy on diesel and seeds while scrapping import duties on oilseed cakes including soybean meal yesterday, Farm Minister Pawar said. The government will give 19.3 billion rupees ($346 million) to affected states for irrigation and drinking water, he said.

To contact the reporters on this story: Pratik Parija in New Delhi at pparija@bloomberg.net; Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net

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


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