Aug. 10 (Bloomberg) -- India’s monsoon rains, the main source of irrigation for the country’s 235 million farmers, may be the weakest in five years, curbing output of sugar and rice and stoking global commodity prices.

Rain in the June-September season will be 87 percent of the long-period average, compared with 93 percent forecast in June, Ajit Tyagi, director general at India Meteorological Department said, paring his forecast for a second time in three months. The showers can be 4 percent more or less than the estimate, he said.

Crop shortages in the world’s second-biggest producer of sugar, rice and wheat may help support a rally that helped the Reuters/Jefferies CRB Index of 19 commodities post its first quarterly gain in a year. Deficient rains may shave as much as one percentage point off India’s economic growth this year, said Raghuram Rajan, an adviser to Prime Minister Manmohan Singh.

“Any shortage on food can push up the consumer price index much faster this time,” said Dharmakirti Joshi, an economist at Crisil Ltd., a unit of Standard & Poor’s. “The index is very high in comparison to previous drought situations in 2002-03.”

Consumer prices paid by farm workers jumped 11.52 percent in June from a year earlier after gaining 10.21 percent in May. Prices paid by rural workers rose 11.26 percent in June from 10.21 percent in the previous month. The weather bureau’s rain forecast matches falls in 2004 that were 87 percent of average.

Shares of consumer-product companies and automobile makers paced declines in India’s benchmark Sensitive stock index amid concern deficient rainfall may cut incomes of the 742 million people living in villages, cooling demand for their products.

Shares Slump

Mahindra & Mahindra Ltd., the largest producer of sport- utility vehicles and tractors, dropped 9 percent and Maruti Suzuki India Ltd., the maker of half the cars sold in India, lost 3.5 percent. ITC, the nation’s biggest cigarette maker, fell2.3 percent and Hindustan Unilever Ltd., the biggest household products maker, slid 3.3 percent.

Showers in July, the wettest month in the June-to-September season, were more than forecast. That wasn’t enough to wipe out the 46 percent deficit in June, which received the lowest rain in 83 years. Falls in the week ended Aug. 5 were 64 percent below the average 65.9 millimeters.

The forecast for August has been lowered to between 85-to- 90 percent of the long-period average from 101 percent predicted in June, IMD’s Tyagi said in a telephone interview from Pune. Rainfall deficit since June 1 has widened to 28 percent as of Aug. 8, he said.

“The deficiency in rains June and early parts of August may not be made up in the coming days and therefore, we decided to lower the forecast,” he said.

Worst Hit

Rice has been the worst hit, with the crop area falling by 5.8 million hectares as of Aug. 6, the farm ministry said today. Uttar Pradesh, India’s No.2 sugar producer, has declared drought in 47 districts and Maharashtra, the biggest, has cut its output forecast to 4.6 million tons from 5 million tons.

Raw sugar has surged 82 percent this year, fueled by lower output in India and Brazil. October-delivery sugar rose as much as 3.6 percent to 21.55 cents a pound in after-hours trading, the highest for a most-active contract since March 30, 1981.

White sugar reached the highest since 1983 in London, and prices in Vashi, India’s biggest wholesale market, jumped 4.1 percent to a record 2,901.25 rupees per 100 kilograms.

To be sure, the country’s drought-struck sugar cane and rice growing regions in Uttar Pradesh, Maharashtra and Andhra Pradesh states, may receive widespread rains starting in the next 48 hours, the weather bureau said on its Web site today.

“There are strong signals of a revival,” Tyagi said.

There may not be shortages of food grain this year as the government purchased a record 30 million tons of rice and 25.1 million tons of wheat from farmers, Farm Minister Sharad Pawar told parliament last week.

“If the monsoon revives from now on the damage to crops may be limited,” Crisil’s Joshi said. “But the damage done to crops such as paddy can’t be undone now.”

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net.

Last Updated: August 10, 2009 08:12 EDT