India Grain Output Seen Testing Record With Stronger Monsoon

Updated on
  • Showers in June-September season seen 106% of 50-year average
  • Rainfall seen above average first time since 2013: IMD

Forecasts for the first above-average monsoon in India in three years is set to boost planting of crops from rice to oilseeds, with record food grain output possible after two years of shortfall.

Rainfall from June is seen at 106 percent of the 50-year average of 89 centimeters (35 inches) as the El Nino that often triggers dry weather weakens, the India Meteorological Department said Tuesday. The forecast has a margin of error of 5 percent. Showers may be 105 percent of the mean, Skymet Weather Services Pvt., said Monday.

The prediction for a stronger monsoon after the first back-to-back deficit in 30 years is seen bolstering Prime Minister Narendra Modi’s aim to double farmer incomes in five years and stem the slide in his popularity ahead of key state elections next year. Output of crops including rice, corn, sugar cane and oilseed all fell last season increasing the cost of food in Asia’s third-largest economy.

“Food grain production may touch previous records or it may cross” above them, K.K. Singh, head of the agro meteorological division of the state forecaster, said by phone on Tuesday. “After deficient years there will be less soil borne diseases, which is good for the crops. Farmers will definitely increase acreage.”

Food Prices

The June-September rains are crucial to keep food prices in check as the rainfall in that period accounts for about 80 percent of India’s total and waters more than 50 percent of farmland. The central bank cut its key interest rate for the first time in six months on April 5 with Governor Raghuram Rajan saying he would watch its performance to look for more room to ease. About half of India’s 1.3 billion people are employed in agriculture, which accounts for almost 20 percent of the nation’s $2 trillion economy.

“With a good monsoon we will look at a larger production for sure while prices will certainly reduce,” Pravin Dongre, chairman of the India Pulses and Grains Association, said by phone on Tuesday. “You will see a drop in imports. It’s matter of demand and supply. Things are looking good.”

Automakers Surge

The S&P BSE Sensex, India’s benchmark stock index, jumped to a three-month high, as automakers and companies linked to rural demand rallied. Mahindra & Mahindra Ltd., the largest tractor maker, surged the most in five years. Two-wheeler producer Bajaj Auto Ltd. climbed to a record. EPC Industrie Ltd., a maker of irrigation equipment, rallied to a two-month high.

“The monsoon forecast has brought in optimism,” Mahesh Nandurkar, a strategist at CLSA Asia-Pacific Markets in Mumbai, said in an interview to Bloomberg TV India. “A good monsoon will help accelerate the agriculture-sector GDP, and the overall economy will improve on the back of that. We are excited about the rural consumption plays.”

The monsoon affects both summer and winter sowing. Rainfall was 14 percent below the 50-year average in 2015, following a 12 percent shortfall in 2014, data from the India Meteorological Department show.

La Nina

El Nino has already peaked and will continue to decline, according to forecasters from the U.S. to Australia. The chances of a La Nina developing this year have increased to 50 percent as the Pacific Ocean cools, Australia’s Bureau of Meteorology said Tuesday.

Based on the 26 El Nino events since 1900, about 50 percent have been followed by a neutral year with 40 percent by La Nina, which typically brings more rain to parts of Asia, including India, Australia’s forecaster said.

“During 71 percent of the years followed by El Nino, monsoon was normal and above,” the Indian forecaster said.

— With assistance by Vrishti Beniwal, Manish Modi, Rajhkumar K Shaaw, Pradeep Kurup, and Ameya Karve

(Updates stock prices in seventh paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE