India may restrict exports of rice, wheat, sugar, cotton and onions to bolster domestic supplies as the worst monsoon since 2009 threatens harvests, Espirito Santo Investment Bank Research said.
Imports of cooking oils and lentils are set to increase as below-average rainfall delays sowing, a unit of Espirito Santo Financial Group SA, said in a report today. Droughts from the U.S. to Russia may limit India’s ability to import food crops cheaper this year, it said.
India, the world’s second-biggest grower of rice, cotton and sugar, is facing the weakest monsoon in three years that’s reduced plantings and fueled prices of grains and oilseeds. The government will refrain from banning exports of food grains and sugar for now, Food Minister K.V. Thomas said July 26. State reserves of rice were 30.7 million tons, more than double the amount required to run welfare programs and emergencies, government data showed.
“We think the overall monsoon picture is worse than that seen in 2009,” Espirito said. “The situation this year is somewhat similar to 2002” when rains were 19.2 percent below normal, cutting summer food grain production by 22 percent, the report said. Food-grain output fell 13.5 percent in 2009 even as the monsoon rains were 21.8 percent below normal, it said.
Monsoon, which brings more than 70 percent of India’s annual rain, is set to be less than normal for the first time in three years. Rainfall during June 1 to July 29 period was 21 percent below normal, according to the India Meteorological Department. The government extended a ban on the export of sugar, rice, and wheat in 2009. Bumper harvests in 2010 and 2011 enabled it ease the curbs and allow free exports of wheat, rice, sugar, cotton and onion.
“A significant decline in rice production this year, particularly in the states of Bihar, Uttar Pradesh, West Bengal, Assam, Punjab and Haryana, appears inevitable,” Espirito said.
Rice output fell 23 percent, or by 21 million tons in 2002, it said.
“Poor rains globally may further worsen things for India, limiting the scope for it to import commodities at cheaper rates,” it said. India is expected to increase imports of lentils, estimated at 3 million tons in the financial year started April 1, and edible oil, the report said.
Dry weather from the U.S. to Australia has parched fields, pushing up corn, wheat and soybean prices on concern global supplies will be curbed. Countries such as Russia, Korea, Ukraine and Sri Lanka face a drop in agricultural output due to deficient rains, Espirito said.
“Food inflation was low during the drought in 2002-2003 as there were huge buffer stocks of food grains,” the Confederation of Indian Industry said in an e-mailed statement yesterday. “Although the situation is similar today in terms of grain stocks, inflationary concerns have now moved to crops such as pulses and oilseeds as well as perishables.”
Gujarat, Maharashtra and Rajasthan, states with the biggest deficit in rainfall this year, account for about 50 percent of India’s oilseed production, 40 percent of pulses output and over 57 percent of the cotton crop, and the impact of a weak monsoon could be severe, Espirito said.
“The bad news is that India is increasingly drought prone, yet seemingly no better prepared to handle the effects,” the report said.