How could below normal monsoon rains impact crops?

India has now forecast just below normal monsoon rains, raising concerns about the country's production of key summer-sown crops like rice, cotton, sugar cane, corn and lentils.

The June-September rains are crucial for crop output in the world's second most populous country and Asia's third-largest economy as over half its agricultural land is rain-fed.

Poor monsoon rains have the potential to trim food grain output for one of the world's biggest producers and consumers of sugar and rice, and so reduce the flow of key agricultural commodities into world markets, especially to Asian countries.

Any significant fall in grain production could also fuel already high food inflation and push the Reserve Bank of India to raise interest rates again, after it hiked the cost of borrowing for the 10th time in just over a year last week.

WHAT COULD BE THE IMPACT FOR RICE?

Paddy is the main summer-sown crop in India, the world's second biggest producer of rice.

The biggest rice producing state, West Bengal, and the second-biggest, Andhra Pradesh, have so far received lower-than-normal rains in the current season.

Farmers in these areas have been delaying paddy transplantation operations. If rains fail to pick up in the next two weeks in these areas, it could slash the country's rice production.

But prices are unlikely to surge as the government is holding massive stocks. India's rice inventory was 27.64 million tonnes on June 1 against a target of 17.1 million tonnes.

Good irrigation in northern states which are major rice contributors to government stocks should compensate for any shortfall in other parts of the country.

But concerns about rice production are likely to prolong the government's delay in deciding whether to allow non-basmati rice exports.

COULD SUGAR OUTPUT IN 2011/12 BE AFFECTED?

In 2009, a severe drought cut the country's sugar output below its consumption level, forcing the south Asian country to import and stoking global prices to multi-year highs.

But a repeat of that is unlikely as farmers have already cultivated more cane this year -- on 5.094 million hectares by June 17, up 223,000 hectares over the previous year.

Irrigation facilities are good in the cane producing area of Maharashtra, the biggest producer in India.

In addition, the country is likely to have 6.5 million tonnes of stocks going into the 2011/12 season after an estimated output of 24.2 million tonnes in 2010/11. The country's consumption is pegged at around 22 million tonnes.

India has already allowed exports of 500,000 tonnes of Open General Licence (OGL) sugar this year but poor monsoon rains could stay the government's hand from allowing the further exports of 1.5 million tonnes demanded by the sugar industry.

COULD INDIA RAISE COTTON EXPORTS IN 2011/12?

Despite a higher acreage planted, the world's second-biggest cotton producer's exports in 2011/12 may remain steady or fall slightly with a below-normal monsoon.

Initial sowing reports had indicated a rise in cotton acreage due to early sowing in northern India. But poor monsoon rains in Gujarat and Maharashtra's Vidarbha region may cap the rise in area planted. Maharashtra and Gujarat are top two cotton producers in the country.

Even if the overall cotton area rises in 2011/12 season, output is unlikely to increase by the same amount as weak monsoon rains can trim yields as they did in the 2009/10 season.

Cotton is delicate. If it gets heavy rains after a slow start to the monsoon in end-September or early-October, yields can be hit as happened in 2010/11.

The government has allowed exports of 6.5 million bales for the cotton year ending in September.

COULD IT BOOST INDIA'S EDIBLE OIL IMPORTS IN 2011/12?

Soybean is the main summer-sown oilseed crop in the world's biggest importer of cooking oils.

But sowing operations have been delayed in the key soybean growing areas in Maharashtra and Madhya Pradesh, the top two producing states, because of inadequate rainfall.

Groundnut or peanut is another important summer-sown oilseed. Key peanut-growers Gujarat and Andhra Pradesh states have received sharply lower rains, impacting planting.

Any drop in soybean and groundnut output will force the country to raise edible oil imports, especially of cheaper palm oil from Indonesia and Malaysia.

WILL INDIA NEED HIGHER LENTILS IMPORTS IN 2011/12?

Despite holding the tag of the world's biggest producer of lentils, India is also the largest importer of lentils as rising domestic consumption outpaces harvests.

Pigeon peas or tur, black gram or urad, and green gram or moong are the key pulses grown in the summer season. Most of the area planted with these lentils is rain-fed and delayed arrival of rains could cut the area under planting for green gram, the shortest duration key lentil crop in the country. It may also cut yields of pigeon peas and black gram.

A drop in output could mean higher imports of these pulses, which India obtains mostly from Myanmar.

But high inventory due to record lentils output in the previous year could help to cap imports and price rises.

COULD WINTER-SOWN CROPS LIKE WHEAT BE AFFECTED?

Yes. Monsoon rains replenish reservoirs and increase ground-water levels. Low reservoir levels could affect wheat and chickpea sowing. But rainfall in September is more important for the winter-sown crops than July and August rains.

During deficient monsoon rain years many farmers fail to cultivate summer-sown crops on time and turn to early sowing of winter-sown crops.

source: reuters