Farm Revenues, Profits Set To Rise Despite Uneven Rains, Says Crisil

While the southwest monsoon went from deficient to surplus in three months, a delay in pick-up and skewed district-wise distribution distorted agricultural trends. Still, Crisil estimates that profits on crops are likely to rise.

When other growth engines are not firing, the monsoon gains greater prominence for the kick it can provide, said Dharmakirti Joshi, chief economist at Crisil Research. Despite the best rainfall in as many as six years, it was not well distributed and the year is a classic case of how distortion can play spoilsport, he said.

The southwest monsoon went from 36 percent deficiency in the beginning of the season to a surplus of 2 percent of the long-period average as on Aug. 23, according to India Meteorological Department. Area covered under kharif crop saw a modest decrease in 2019 of about 2.6 percent over a year ago.

But the drop in production is likely to be offset by higher prices, according to a Crisil report.

Rainfall patterns have affected kharif crops, particularly paddy, which is likely to take a hit on account of lower acreage and crop damage. Kharif production is estimated to fall 3 to 5 percent, according to Crisil’s estimates, after three years of record output.

That’s expected to push up mandi prices, and boost profitability of most crops, providing respite to farmers, the report said. Some crops such as sugarcane would be an exception, with profit hit by lower acreage and productivity.

Amid a mixed outlook for kharif, there are now improved chances of healthy rabi production because of recharging of groundwater, said Joshi.

Agri-weighted mandi prices are expected to go up though they are unlikely to rise by as much as they did last year because of a sharp revision in the minimum support price for paddy and wheat, and higher demand in case of cereals and cash crops.

While the prices of pulses bottomed out due to lower exports and steady domestic demand, there was a steep jump in the prices of coarse grains this year.

Despite the expected and much-needed price rise, food inflation is unlikely to come in the way off monetary policy because of the government’s buffer stocks and the fall in the global food index, Joshi said.

States Swing Between Excess And Shortage

While parts of Madhya Pradesh and Maharashtra, and low-irrigation states like Rajasthan received excess rainfall, Haryana and West Bengal saw deficient rains.

To be sure, states like West Bengal are still likely to see some farm distress. ‘Northern states are expected to reap highest profits, even as southern states recover from losses and eastern states see a drag,” said Hetal Gandhi, director at Crisil Research. Northern states stand to benefit from a more favourable crop mix, limited dependence on rainfall, and higher farm mechanisation, Gandhi said.