Commodities Hit the Roof as Monsoon Loses Vigour
Prices of sugar, oilseeds, soyabean, soyaoil & turmeric rocket on exchanges
Commodity
futures rose sharply and many hit the upper circuit as the patchy
monsoon heightened concerns of crop losses while the agriculture
minister admitted it would be challenging to maintain the farm sector
growth achieved in the past two years.
Sugar, oilseeds, soyabean, chana, soyaoil and turmeric soared to their contract highs on commodities exchanges as government and industry officials said they were scaling down output estimates, with rainfall continuing to falter at the peak of the monsoon season.
The government, which had so far maintained that concerns about the impact of weak rainfall were exaggerated, has alerted the department of drinking water and sanitation to take note of the “rapidly depleting” reservoir levels in several states and directed officials to ensure that there was no shortage of drinking water. ET was the first to report, on July 3, that the country was on the brink of a shortage of drinking water and hydropower, and faced crop losses. Rainfall remained erratic on Monday although total precipitation in the country was 6% above normal, helping the seasonal deficit contract by one percentage point to 21%. The distribution was uneven. In the paddy-growing north and northwestern regions, the shortfall since June 1 widened to 34% as rainfall was 56% below average on Monday. The seasonal average was propped by up the east and northeastern regions, which received double the normal rainfall on Monday.
Agriculture Minister Sharad Pawar underlined the dependence of agriculture on the monsoon. “This continues to challenge the farming community, scientists and policymakers
alike. This year, with the monsoon playing hide and seek, it will be really a challenge to maintain the excellent performance of the last two years,” he said. Last fiscal year, the agriculture and allied sector grew 2.5% while its share in the GDP fell to 13.9% from 14.7% in 2009-10. Economists say the impact of the drought on the overall economy would be mitigated by the shrinking share of agriculture in the GDP and rise of non-farm income, but crop loss would cause human suffering as about 60% of the population depends on the sector for livelihood. Edible Oil, Sugar Cos Worried
Edible oil players such as Adani Wilmar, Sanwaria Oils and Emami fear a price hike of Rs 2-3 per litre in the short term if the crop situation worsens. The low soya crop situation internationally has also affected the overall edible oil complex with prices of ricebran and mustard oil going up Rs 5-8 per litre in the last one month.
“Monsoon is playing truant in most of the oilseed-producing regions of the country. If it doesn’t rain in the next few days, then the crop under first sowing will get affected. The second sowing will also be delayed. Already the crop situation in the US and Brazil is not favourable. All these factors will push up prices of all kinds of oil in the short term by Rs 2-3 per litre,” said Angshu Mallik, chief operating officer of Adani Wilmar.
The sugar industry is also distressed and is scaling down output forecasts. In Maharashtra, which is India’s top producer and has faced a particularly severe dry patch, output is forecast to drop at least 17%. Spot and futures sugar prices have jumped by Rs 4 per kg in the past 15 days. If the rainfall does not improve soon, the situation would deteriorate, officials said.
“There is a severe impact of rainfall deficiency on sugarcane crop. Lot of cane is also being diverted for use as fodder,” said Vijay Singhal, the state’s sugar commissioner. According to estimates revised 15 days ago, the state is expected to crush 650 lakh tonnes of sugarcane and produce about 75 lakh tonnes of sugar in the 2012-13 season, he said.
Industry officials said the situation may not improve. "There has been a severe impact of the deficient rainfall on the sugarcane crop. After revising our cane availability estimate downward by 15% in June, we have now again revised it downward. We expect sugarcane production to fall by at least 25%, even if there is full recovery in rainfall here after. Along with the reduction in area and per-hectare yield, the recovery of sugar is also expected to decline due to water scarcity," said BB Thombre, chairman and managing director, Natural Sugar and Allied Industries.
Wholesale sugar prices have increased by Rs 4-5/kg in the last 15-20 days. One official said area under sugarcane may drop 30% and even more if rainfall doesn’t revive in two weeks. The government has stepped up efforts to implement contingency measures to mitigate the hardship of people. The government said the department of animal husbandry, dairy and fisheries has been requested to prepare contingency plans for production of fodder, in order to meet the requirement of states such as Karnataka, Maharashtra, Gujarat and Rajasthan.
(Rituraj Tiwari in New Delhi contributed to this report)
Sugar, oilseeds, soyabean, chana, soyaoil and turmeric soared to their contract highs on commodities exchanges as government and industry officials said they were scaling down output estimates, with rainfall continuing to falter at the peak of the monsoon season.
The government, which had so far maintained that concerns about the impact of weak rainfall were exaggerated, has alerted the department of drinking water and sanitation to take note of the “rapidly depleting” reservoir levels in several states and directed officials to ensure that there was no shortage of drinking water. ET was the first to report, on July 3, that the country was on the brink of a shortage of drinking water and hydropower, and faced crop losses. Rainfall remained erratic on Monday although total precipitation in the country was 6% above normal, helping the seasonal deficit contract by one percentage point to 21%. The distribution was uneven. In the paddy-growing north and northwestern regions, the shortfall since June 1 widened to 34% as rainfall was 56% below average on Monday. The seasonal average was propped by up the east and northeastern regions, which received double the normal rainfall on Monday.
Agriculture Minister Sharad Pawar underlined the dependence of agriculture on the monsoon. “This continues to challenge the farming community, scientists and policymakers
alike. This year, with the monsoon playing hide and seek, it will be really a challenge to maintain the excellent performance of the last two years,” he said. Last fiscal year, the agriculture and allied sector grew 2.5% while its share in the GDP fell to 13.9% from 14.7% in 2009-10. Economists say the impact of the drought on the overall economy would be mitigated by the shrinking share of agriculture in the GDP and rise of non-farm income, but crop loss would cause human suffering as about 60% of the population depends on the sector for livelihood. Edible Oil, Sugar Cos Worried
Edible oil players such as Adani Wilmar, Sanwaria Oils and Emami fear a price hike of Rs 2-3 per litre in the short term if the crop situation worsens. The low soya crop situation internationally has also affected the overall edible oil complex with prices of ricebran and mustard oil going up Rs 5-8 per litre in the last one month.
“Monsoon is playing truant in most of the oilseed-producing regions of the country. If it doesn’t rain in the next few days, then the crop under first sowing will get affected. The second sowing will also be delayed. Already the crop situation in the US and Brazil is not favourable. All these factors will push up prices of all kinds of oil in the short term by Rs 2-3 per litre,” said Angshu Mallik, chief operating officer of Adani Wilmar.
The sugar industry is also distressed and is scaling down output forecasts. In Maharashtra, which is India’s top producer and has faced a particularly severe dry patch, output is forecast to drop at least 17%. Spot and futures sugar prices have jumped by Rs 4 per kg in the past 15 days. If the rainfall does not improve soon, the situation would deteriorate, officials said.
“There is a severe impact of rainfall deficiency on sugarcane crop. Lot of cane is also being diverted for use as fodder,” said Vijay Singhal, the state’s sugar commissioner. According to estimates revised 15 days ago, the state is expected to crush 650 lakh tonnes of sugarcane and produce about 75 lakh tonnes of sugar in the 2012-13 season, he said.
Industry officials said the situation may not improve. "There has been a severe impact of the deficient rainfall on the sugarcane crop. After revising our cane availability estimate downward by 15% in June, we have now again revised it downward. We expect sugarcane production to fall by at least 25%, even if there is full recovery in rainfall here after. Along with the reduction in area and per-hectare yield, the recovery of sugar is also expected to decline due to water scarcity," said BB Thombre, chairman and managing director, Natural Sugar and Allied Industries.
Wholesale sugar prices have increased by Rs 4-5/kg in the last 15-20 days. One official said area under sugarcane may drop 30% and even more if rainfall doesn’t revive in two weeks. The government has stepped up efforts to implement contingency measures to mitigate the hardship of people. The government said the department of animal husbandry, dairy and fisheries has been requested to prepare contingency plans for production of fodder, in order to meet the requirement of states such as Karnataka, Maharashtra, Gujarat and Rajasthan.
(Rituraj Tiwari in New Delhi contributed to this report)
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