Kharif farm profits to grow despite fall in production

Dharmakirti Joshi. File

Dharmakirti Joshi. File  

Growth projection of 11-13% slower than last year

Farmers’ profits from field crops are likely to grow 11% to 13% during this kharif or summer crop season, according to a projection by CRISIL Research.

Although food grain production is likely to fall, hit by erratic rainfall in some areas and pests in others, higher demand and higher mandi prices will help farmers. However, the projected profit growth rate is still lower than last year’s rate of 16%, CRISIL economists said on Thursday.

After three years of record production, kharif output is likely to decline 3% to 5% this year, with sowing acreage and yields both hit by the uneven distribution of rainfall. “The overall quantum of rainfall is normal, but there was a 36% deficiency in June, which affected paddy acreage mostly in eastern India, and then excess rainfall affecting some crops in August,” said CRISIL chief economist Dharmakirti Joshi. “But the good news is that abundant rains in August have also improved the chances of a healthy rabi season, which is more dependent on irrigation, recharging of groundwater and higher reservoir levels.”

Mitigating impact

CRISIL researchers also pointed out that deficient rains mostly impacted Haryana and West Bengal, which both have irrigation coverage higher than the national average, mitigating overall impact to a certain extent. However, farmers in certain pockets within States such as western Uttar Pradesh and Marathwada were also hit by deficient rainfall, while parts of Madhya Pradesh, Gujarat, Karnataka and Rajasthan are likely to have crop losses due to excess rainfall.

Erratic rainfall had the worst impact on paddy, but groundnut and sugarcane may also be affected, said CRISIL’s findings. The fall armyworm has wreaked havoc on parts of the maize crop, while pest attacks will hit groundnut and sugarcane crops, especially in Maharashtra.

Demand factors

The surplus production of the last few years has led to stagnant food inflation and low mandi prices for many crops, impacting farmers’ profitability. This year, demand factors may help push up prices, especially for cash crops and oilseeds. “The U.S.-China trade war is likely to boost Indian exports of cotton and soyabean. There is an increasing demand for maize, especially as poultry feed. The plastic ban in many States may increase demand for jute products,” said Hetal Gandhi, Director, CRISIL Research. The lower production of paddy and other cereals will also help prop up prices, especially if supported by a robust government procurement system, she added.

Overall, CRISIL projected that mandi prices would be 10% higher than last year, with revenues rising 7% and profits at least 11% for all kharif foodgrain crops. For 15 key MSP (Minimum Support Price) linked crops — barring sugarcane — per hectare crop profitability is likely to rise 21% from last year, it added.

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Printable version | Mar 28, 2020 1:53:42 AM |

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