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Year-ender: Will 2020 be better for agriculture?

Farm prices looking up, along with bumper rabi production, can set the stage for long overdue turnaround.

Written by Harish Damodaran | New Delhi |
Updated: December 26, 2019 7:27:16 am
india agriculture sector, agriculture crisis, agriculture problems in india, india farmers, farmers crisis, onion price, food inflation Onions, pulses and milk apart, even commodities such as soyabean, maize and bajra (pearl-millet) are showing some bullishness.

Onion prices, at Rs 100-plus per kg in retail and an average of Rs 6,500/quintal even in Maharashtra’s Lasalgaon wholesale market, have made headlines in a year that is coming to a close. But it’s not just onions. There are many other farm commodities whose prices have been looking up, if not soaring, of late.

Take pulses: Last year, at this time, arhar (pigeon-pea) was trading at Rs 4,500 per quintal in Latur mandi of Maharashtra. Currently, it is selling at Rs 5,000. Likewise, prices of urad (black gram) in Latur have crossed Rs 7,000 per quintal, compared to Rs 4,500-4,600 a year ago, while that of moong (green gram) in Rajasthan’s Sumerpur market has gone up from Rs 5,200 to Rs 6,000 levels in the same period. These rates are close to or even higher than the minimum support prices (MSP) of Rs 5,800/quintal for arhar, Rs 5,700 for urad and Rs 7,050 for moong.

Read | These farmers who broke the mould point the road ahead for many

The price increase in pulses would, in fact, have been higher, but for the stocks built from government procurement. During the 2016-17, 2017-18 and 2018-19 agricultural years (July-June), the Central agencies — National Agricultural Cooperative Marketing Federation of India (Nafed), Food Corporation of India and Small Farmers’ Agribusiness Consortium — together bought 18.78 lakh tonnes (lt), 44.96 lt and 19.50 lt of pulses, respectively. While stocks in the Central pool with Nafed amounted to nearly 42 lt at its peak in June 2019, the apex agency is still holding 20.90 lt (as on December 21), mainly comprising 16.41 lt of chana, 2.19 lt of moong, 1.99 lt of urad and 0.29 lt of masur (lentil).

Those stocks have come useful this year, which saw less area being sown under kharif pulses, courtesy poor monsoon rains till about the last week of July. That, along with excess rains thereafter up to early-November, causing significant damage to the standing crop, has resulted in a decline in kharif pulses production similar to that for onions. The only reason why dal has not gone the pyaaz way is the stocks with Nafed.

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The absence of such a buffer is now being felt not only in onions, but perhaps also in milk.

Last year, around this time, dairies in Maharashtra were paying farmers Rs 19-21 per litre for cow milk containing 3.5% fat and 8.5% solids-not-fat. That same milk is today being procured at Rs 29-31 a litre. In 2018-19 (April-March), India exported 45,082 tonnes of skimmed milk powder (SMP), with the Centre even extending a subsidy of Rs 50/kg to enable dairies to ship out their excess stocks. But with output set to dip in 2019-20, due to the cumulative impact of sustained low producer prices and extended rains, SMP prices have doubled to over Rs 300 per kg in the last one year.

Not having created a buffer stock, when dairies were saddled with surplus powder and forced to slash procurement as well as prices paid to farmers, may prove costly soon. The winter and spring months are the ‘flush’ season for milk. Animals normally produce more during this time because of better fodder and water availability, besides reduced body stress on account of lower temperatures and humidity. This year, though, the onset of ‘flush’ has been delayed by the late rains, which have not allowed the fodder to grow properly and accumulate sufficient dry matter. Most dairies have recorded negative milk procurement growth so far in 2019-20. It remains to be seen how much of this can be made up for in the next few months before summer, when ‘flush’ gives way to ‘lean’ and dairies would need to have sufficient stock of powder for reconstituting into milk.

india agriculture sector, agriculture crisis, agriculture problems in india, india farmers, farmers crisis, onion price, food inflation

Onions, pulses and milk apart, even commodities such as soyabean, maize and bajra (pearl-millet) are showing some bullishness. Soyabean is quoting at Rs 4,000 per quintal in Ujjain (Madhya Pradesh), up from Rs 3,300 a year ago. Prices of maize at Davangere (Karnataka) have similarly risen from Rs 1,600 to Rs 1,900 and that of bajra from Rs 1,500 to Rs 2,100 per quintal in Chomu (Rajasthan). The current market prices are higher than the MSPs: Rs 1,760 per quintal for maize, Rs 3,710 for soyabean and Rs 2,000 for bajra.

The above price recovery — even sugar seems to be turning around, thanks to a global deficit that has opened up export opportunities for Indian mills — should actually be welcome for an economy desperately looking for good news. The underlying factors here are partly structural (farmers reducing planting or investing less in yield-enhancing inputs in response to low realisations in the past few years) and partly weather-induced (early season drought followed by prolonged unseasonal rains). But to the extent these are helping bring back ‘sentiment’ in produce markets, badly battered in the post-demonetisation period, there is a strong case for policymakers not to be unduly perturbed.

In the days to come, there is bound to be lot of pressure for cutting duties or allowing more import of SMP and pulses. The Narendra Modi government, in its first term, was very hawkish with regard to food inflation. It would be interesting whether it will adopt the same approach in its second term as well — this has already been witnessed vis-à-vis onions — especially with consumer food inflation in crossing single-digits in October for the first time in almost six years.

The one consolation, however, is the prospect of a bumper rabi harvest. The surplus monsoon and post-monsoon rains have recharged groundwater aquifers, apart from filling the country’s major dams close to their full reservoir capacities. That has, in turn, encouraged farmers to aggressively expand the area sown under most rabi crops.

If the current price recovery trend holds and rabi production turns out good — there is room for optimism on that count — it would set the stage for a long overdue agricultural turnaround.

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