Kharif Cultivation Still Below Last Year's Levels As Monsoon Begins To Recede

Area under kharif crops continued to lag last year's coverage despite an improvement in sowing activity, suggesting pressure on prices may persist despite export curbs.

Coverage under rice sown remains 18.9% below 2021 at 399.03 lakh hectares, according to data published by the Department of Agriculture and Farmers Welfare on Sept. 20.

For pulses, it fell 5.6%, while coarse cereals saw a rise of 7.3%, according to the progress report up to Sept. 16. Oilseeds saw a fall of 1.3% from last year, led by a fall in the area under groundnuts.

Agricultural production in India has been challenged by lower acreage of rice amid an erratic monsoon this year and lower production of wheat because of heat waves.

Retail inflation in rice rose to 6.9% in August—the highest since June 2020—while inflation in atta rose to 15.7%, the fastest pace since at least 2015. Daily average retail prices of commodities, published by the Department of Consumer Affairs, show that prices of rice, wheat and atta, continue to remain elevated in September.

Average retail price of rice trended at Rs 38.31 per kg on September 20 compared with Rs 37.4 a month ago. Retail price of atta was at Rs 36.1 per kg against Rs 35.2 a month ago.

According to its Sept. 20 notification, the Directorate General of Foreign Trade extended the ban on exports of broken rice up to Sept. 30.

India's rice production could fall by 10-12 million tonnes during the kharif season this year due to a fall in paddy sowing area, Food Secretary Sudhanshu Pandey had said earlier this month. Still, the country will have surplus production of rice, he said.

The decision to ban exports of broken rice and impose a duty of 20% on exports of other qualities of rice, excluding Basmati, is bound to have implications for exports though domestic rice shortages are not anticipated given very high levels of buffer stocks, said a previous research note by Barclays.

Earlier, the government had prohibited exports of wheat and its to manage food security.

According to the Food Corporation of India, the rice stock was at 244.6 lakh metric tonnes, while for wheat it was at 248.2 lakh metric tonnes in September.

In recent years, given large grain output and material buffer stocks, India has become the world's largest exporter of rice, overtaking Thailand and Vietnam, Rahul Bajoria, chief economist at Barclays, said. The increase shipments has largely been a function of several good harvesting cycles, which not only pushed up the production of rice, but also increased buffers dramatically. However, extreme weather events and disparate rainfall conditions this year mean a likely reduction in India rice output, and a consequent increase in prices, he added.

Despite the export ban, the expected fall in rice production and the government’s procurement obligations indicate that the rice surplus could further reduce this year, although it should remain above the buffer stock levels, according a Sept. 11 note by Nomura. If local rice prices rise further, additional curbs on rice exports cannot be ruled out, it said.