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 Food prices are a political hot potato in India, where more than a
quarter of its population of 1.2 billion people live on a mere 74
cents or less per day. In fact, high food prices have already pushed
the country's June consumer inflation to an eight-month high.
That is why the ongoing dryness in central, western and southern
India - key producing regions for cotton, soybean, corn, sugarcane,
pulses and rice - is a big cause for worry. Poor output of summer
crops would further lift food prices, restricting the central bank
from cutting lending rates, crucial to boosting Asia's third-biggest
economy.
"The outlook for inflation over the next few months depends squarely
on monsoon rains for the remainder of the season," HSBC said this
week. India's farm sector accounts for 15 percent of its economy and
given half its farmland lacks irrigation, the monsoons are crucial.
A heavy downpour early last month had lifted the rain surplus to 28
percent, raising farmers' hopes of a good June-September monsoon
season despite forecasts for the emergence of an El Nino weather
pattern. But following the dry spell, rains are now 6 percent below
normal, with the deficit as high as 52 percent in some regions,
weather department data shows.
"Sowing has nearly stopped due to the dry spell. Even sown crops are
under severe stress," said Vikas Deshmukh, agriculture commissioner
of Maharashtra state, India's second-biggest cotton and soybean
producer as well as its top sugar producer.
Indian farmers had initially rushed to sow seeds after ample rains,
bringing total planting levels to 44.5 million hectares by July 10,
up 62 percent year on year.
But the higher number does not give a correct picture as monsoon in
2014 was delayed and so was the sowing, said B.V. Mehta, executive
director of the Solvent Extractors' Association. In 2013, when rains
were ample, by this time farmers had planted on nearly 52 million
hectares.
GRIM OUTLOOK
For millions of farmers in India, where three fifths of the
population depend on agriculture for their livelihood, the fate of a
single crop can be the difference between life and death.
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Earlier this year, dozens of debt-laden farmers committed suicide
after damage from unseasonal rains, and poor summer-crop yields
would exacerbate the pain for Prime Minister Narendra Modi's
government that is struggling to address rural distress.
"I can sow crops once again when we get rains, but I don't have
money to buy seeds," said Narayan Patil, a farmer from Sarve village
of Jalgaon district, 400 km north-east to Mumbai.
For Patil, and several others, the outlook is grim.
The official forecast remains that this year India could suffer its
first drought since 2009 because of El Nino, which can lead to
scorching weather across Asia.
Maximum temperatures in central and southern India are currently up
to 6 degree Celsius above normal, hurting crop growth, said Nitin
Kalantri, a pulses dealer.
A drop in domestic output could lift overseas purchases of edible
oils and pulses by India, the world's biggest importer of both,
while limiting its rice and cotton exports.
"Crop yields are likely to be lower than normal this year even if
monsoon becomes active in next few days," said Vandana Bharti,
Assistant Vice-President (Commodity) with SMC Global Securities Ltd.
(Editing by Himani Sarkar)
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