Rainfall is 38 percent below a 50-year average since June 1, the least since 2009, according to the latest estimate on the website of the India Meteorological Department. The monsoon, stalled over India’s western and central regions since June 15, may not progress further before the beginning of July, B.P. Yadav, head of the National Weather Forecasting Centre, said by phone from New Delhi today.
With more than 80 percent of India getting limited rain, delayed sowing may lead to a decline in crop areas and yield, hampering efforts by Prime Minister Narendra Modi to revive growth from near a decade low. An estimated 833 million people out of the 1.2 billion population depend on agriculture for their livelihood and the sector accounts for 14 percent of the nation’s gross domestic product.
“If July rain turns out to be the way it has behaved in June, then there will be issues” for crops, Devendra Pant, chief economist at India Ratings & Research Pvt., Fitch’s local unit, said by phone from New Delhi today. “June and July are the two months which are very critical for sowing.”
The monsoon is the main source of irrigation for India’s 263 million farmers because about 55 percent of crop land is rain dependent. While showers have been deficient so far, a revival by the first week of July may accelerate planting, said J.S. Sandhu, India’s Agriculture Commissioner.
“It is not that everything is lost,” Sandhu said. “Sowing may be delayed and we have a sowing window up to July 15 for crops like soybeans, peas, corn and sorghum.”
There will be considerable planting delays for soybeans, peanuts and cotton while sugarcane in western and south central areas are stressed, MDA Weather Services said yesterday. India is the world’s second-biggest producer of rice, sugar, cotton and wheat and a regular exporter. It meets more than 50 percent of cooking oil demand through imports.
Monsoon-sown crops such as turmeric, guar gum, onions and sugar are already rising. Sugar gained 4.1 percent this month in Mumbai and turmeric is up 5.2 percent. Guar gum, a thickening agent used in food, soared 10.9 percent.
“Prices will look to go higher” because of the weak start to rains, said Pant.
Monsoon rainfall this year will be 7 percent below average in India because of increasing chances of emergence of an El Nino, the meteorological department predicts. The delay in the advance of monsoon was partly caused by cyclone Nanauk that developed in the Arabian Sea this month, Yadav said.
El Nino, which can roil world agricultural markets as farmers contend with drought or too much rain, may be established by September, according to climate models surveyed by Australia’s Bureau of Meteorology. Forecasters from the U.S. and the United Nations are also warning an El Nino will occur.
India consumer inflation gains slowed to 8.28 percent in May, a three-month low, official data show. That compares with 8.34 percent in Pakistan and 2.5 percent in China. Food makes up about 50 percent of India’s consumer-price inflation basket.
Modi’s government has pledged to tackle price gains by offloading 5 million tons of rice, about a quarter of its state stockpiles, at subsidized rates and cracking down on food hoarders. It will also help states to import pulses and cooking oils if needed and set minimum export prices for potatoes, according to Finance Minister Arun Jaitley.
“Most of the commodities are firm as monsoon is delayed and stalled for quite a few days,” Sudha Acharya, a senior analyst at Mumbai-based Kotak Commodity Services Ltd., said by phone. “But there is still time left for sowing until end of July and prices may soften if rainfall is good in July.”
A poor harvest will shrink farmers’ earnings and cut demand for everything from soaps to skin creams, Harsh Mehta, an analyst at HDFC Securities Ltd. in Mumbai, said by phone. Consumer goods makers’ profit margins may be cut as weak rains often increase raw material prices, he said.
Companies including Hindustan Unilever Ltd. (HUVR), Emami Ltd. (HMN) and Dabur Ltd., which get a large part of their sales from rural areas, will probably be affected more by a weak monsoon, said Manish Pushkar, an analyst at Phillip Securities in Mumbai. Rural sales may drop by as much as 10 percent, he said.
A weak monsoon may also threaten gold demand in a country where 65 percent of the consumption is in rural areas, according to UBS AG. Farmers will be forced to sell gold ornaments to meet routine household expenses in the absence of regular farm income, says Prithviraj Kothari, vice president of the India Bullion and Jewellers Association Ltd. India is the world’s biggest consumer of gold after China.
To contact the editors responsible for this story: Jake Lloyd-Smith at firstname.lastname@example.org Thomas Kutty Abraham, Alexander Kwiatkowski