Macro-economic forecasts and analysis
Real-time analysis of data releases and copious indicator data
South-west monsoon played truant in first three weeks of the current season. Precipitation till June 24 was 11 per cent below normal. After an early arrival over Kerala and an erratic initial progress, the monsoon stalled after June 9. Shortfall in rainfall in first week was covered in the second but, the third week witnessed a sharp shortfall of nearly 39 per cent.
India Meteorological Department has predicted that monsoon will progress from June 24. If this turns out to be true then it is likely that the month of June will end with rainfall being close to its normal precipitation. But, temporal distribution within the month will not be very good with a dry patch in the middle of the month.
IMD and Skymet had suggested in their forecasts in May this year that the monsoon would be weak in August. IMD predicted that rainfall in July would be 101 per cent of LPA. But August could be 94 per cent of its LPA. Given the initial weakness in monsoons and in kharif sowing, from a kharif-sowing perspective, it is important that IMD’s July prediction turns out to be true.
The spatial distribution of rains during the first three weeks of the season was quite uneven.
All southern peninsula states have received good rains. Overall, the region received 25 per cent more rains than is normal during this period.
In central India, Gujarat, Saurashtra & Kutch suffered the most - with almost no rains. Odisha wasn’t much better as it received 37 per cent less rains than normal. However, the remaining states in the region received normal rainfall.
Delay of the monsoon’s progress into Gujarat and West Madhya Pradesh has hurt sowing of oilseeds. Soyabean and groundnut sowing till June 22 this year were about 50 per cent of what they were in the same period last year. Prices of both commodities have increased. Groundnut oil price rose from Rs.78.9 per kg in the Rajkot market on June 13 to Rs.81.8 by June 22. Refined soyabean oil price in the Mumbai market increased from Rs.73.5 per kg to Rs.75 per kg in the same period. In both cases, the increases mark a reversal of a declining trend in prices in the past two months.
Cotton sowing till June 22 was 16.3 per cent lower than it was in the corresponding period of the previous year. Perhaps, losses to the pink bollworm pest in 2017-18 has hurt farmers’ enthusiasm to invest into cotton this year. A more pertinent problem could be low prices. Lack of rains could explain only a part of the fall in acreage since Maharashtra, the largest producer of the fibre, had adequate rains. Gujarat however, has suffered from very poor rains.
Raw cotton prices have been weak during June. And, prices in April-May this year have been nearly 10 per cent lower than they were a year ago. In fact, prices today are barely higher than they were two years ago.
Reports suggest that China’s retaliatory import duty on USA, its largest source of cotton, is likely to raise Chinese demand for Indian cotton. This could impact cotton sowing since less than one-fifth of the total cotton sowing was completed till June 22. We need to watch out for the news on how this story unfolds itself this year.
Sowing of pulses has been slow. Till June 22, area under arhar was 44 per cent lower than it was in the corresponding period a year-ago. Black gram (urad) was down by 42 per cent and green gram (moong) was down by 1.5 per cent.
Maharashtra and Karnataka are the two largest arhar producers followed by Madhya Pradesh. Madhya Pradesh is the biggest cultivator of black gram. These regions have received adequate rains and so the lack of adequate sowing under arhar and urad cannot be explained by lack of rains. It is low prices that are holding back cultivation.
The average price of arhar in June 2018 was 4.2 per cent lower than it was in May 2018. Arhar prices in April and May 2018 were 16 and 12 per cent lower than they were a year ago, respectively. A year ago, they were over 50 per cent lower than two years ago. Arhar prices in June 2018 were nearly one-third of their level in two years ago. Urad has a similar price trajectory. Prices in April and May 2018 were 40 and 38 per cent lower than they were in the corresponding months a year ago. And, a year-ago, they were 50 per cent lower than they were two years ago. Today, urad prices are nearly a third of what they were in June 2016. Moong prices are 22 per lower than they were two years ago.
Understandably, farmers are less enthusiastic to sow pulses this kharif season. This implies higher pulses imports this year.
Cultivation of cereals till June 22 was down by 6.9 per cent compared to the acreage during the corresponding period of the previous year. Rice sowing was down 4.5 per cent and coarse cereals by 9 per cent. The delayed monsoon could be a cause for the slow progress in cultivation of cereals. As the monsoon is expected to resume from June 24, sowing of cereals could pick up pace in the coming weeks.
In light of the slow progress of the monsoon, the government has advised farmers to delay sowing. However, low prices could remain a dampener to sowing this kharif season.