Farm Profit To Rise As Lower Kharif Output, MSP Hikes Push Up Prices, Says Crisil
Over 75 percent of kharif sown area and more than 90 percent of rabi sown area are expected to earn higher profit, Crisil said.
Farm profits are expected to rise as output fell and prices rose, according to Crisil Research.
Overall farm profits per hectare will grow 7-9 percent on an annual basis in the April 2019 to March 2020 crop year, according to a report by Crisil. This comes as irregular distribution of the southwest monsoon unevenly impacted the productivity, prices, and profitability, it said.
Higher Mandi prices of kharif foodgrains and an increase in the minimum support price of wheat, which accounts for over 50 percent of the rabi crop output, is expected to aid price growth for rabi crops, the report said, adding that it will lead to an uptick in the overall farm profitability.
Crisil analysed 15 key minimum support price-linked crops on parameters including output, international and domestic demand-supply scenario, share of government procurement and exports, and crop productivity among others.
Below-normal southwest monsoon delayed the sowing of kharif crops, the report said. But a quick turnaround in August and September resulted in 10 percent above-normal monsoon from June 1 to Sept. 30.
The arrival of crop at mandis was 38 percent lower during October-November 2019. A delayed sowing along with crop damage due to excess rainfall will lead to a shortage in market supplies, keeping the mandi prices higher, Crisil said. “Overall, the kharif crop output is expected to be 4-6 percent lower year-on-year.”
A delay in kharif sowing also postponed rabi sowing, which was 15 percent lower as on Nov. 8, the report said. But the excess monsoon also filled the reservoirs to the brim, which promises to elevate rabi crop productivity and lead to 7-8 percent higher output, Crisil said.
Reaping Gains
Over 75 percent of kharif sown area and more than 90 percent of rabi sown area are expected to earn higher profit, Crisil said. And while Uttar Pradesh, Punjab and Haryana will continue reaping the highest per hectare profit, southern states and Gujarat are also expected to see a “robust” growth in profitability, the report said.
Uttar Pradesh, Punjab and Haryana will get a bigger share because of their favourable crop mix, government support in procurement of paddy and wheat, and lower cost of production due to higher mechanisation, Crisil said.
Crisil expects Tamil Nadu, Andhra Pradesh and Telangana to log “healthy growth” in kharif profitability over the previous year, which had a low base because of insufficient rainfall and lower mandi prices.
On the other hand, Maharashtra, Bihar, and Karnataka are expected to take a hit because of kharif crop damage due to floods and excess rain in the current crop year. But “adequate water supply for the rabi crops in these states is expected to lead to a robust growth in rabi productivity and profitability on-year,” Crisil said.