Farm Profit On Field Crops Set To Rise 10-12% Even As Uneven Rains Impact Kharif Output: CRISIL
Farm profit from field crops is expected to increase 10-12% in kharif season 2019 because of expected higher prices and despite lower output, CRISIL Research’s Agriculture Report 2019 said.
After three years of healthy growth, kharif output this time could decline 3-5% because of lower sowing acreage and yields being impacted by uneven distribution of rains.
Delayed onset of monsoon has already led to a sharp 6.4% decline in paddy sowing as on August 22, 2019. Paddy accounts for over 30% of kharif season acreage. However, area under cotton and maize cultivation would be higher than in the previous season as higher prices have encouraged farmers to sow them.
Floods in Maharashtra, Odisha and Andhra Pradesh, and weak rains in West Bengal and the Marathwada region of Maharashtra are expected to affect productivity. Additionally, high-intensity rainfall in August is likely to increase pest attacks on maize and paddy further impacting productivity.
Says Dharmakirti Joshi, Chief Economist, CRISIL, “The quick catch-up in southwest monsoon has meant excess rains in August in a few sub-regions. This has affected kharif crops, particularly paddy. But abundant rains have also improved chances of healthy rabi production because of recharging of groundwater resources and higher reservoir levels.”
Lower kharif output is expected to push up mandi prices, and boost profitability of most crops, providing respite to farmers. Some crops such as sugarcane would be an exception, with profit hit by lower acreage and productivity.
Within the kharif basket, we foresee the following impact:
♦ An upward shift in paddy prices due to lower estimated production
♦ Higher cotton exports to China to support prices
♦ Price support from steady demand growth in soy meal exports and higher domestic soybean crushing as palm oil import duties rise.
♦ Healthy rise in prices of maize on account of higher demand from industries such as poultry feed
♦ Growth in jute demand and prices because of plastic ban in many states
Says Hetal Gandhi, Director, CRISIL Research, “At a regional level, northern states are expected to continue to reap the highest profits owing to a more favourable crop mix, limited dependence on rainfall, and higher farm mechanisation. Further, Gujarat, Madhya Pradesh and Rajasthan are expected to register healthy onyear growth in profits, driven by bajra, cotton and soybean crops.”
The southern peninsula, which had been severely impacted by lower rainfall and drought -like situation over the past three years, is expected to show improvement in profits.
Maharashtra, though, is expected to continue to reap lower profits as increase in profitability from cotton is expected to be offset by shrinking profits in sugarcane and crop damage in Madhya Maharashtra.
Effective implementation of central and state government schemes should further support incomes.