1. Kharif Crop Outlook and Inflation Implications
Commodities Research | India
Rajini Panicker |
29/09/2016
Kharif Crop Outlook and Inflation Implications

2. SW Monsoon 2016 – Progress
As of Sept 27, monsoonal rainfall was at mm which is 97% of long period average.
IMD classifies SW monsoonal rainfall between % of LPA under normal category.
With the exception of Central India , monsoonal rainfall lagged in other states, prompting a mixed pace for kharif crop planting.
Rainfall quantum and distribution picked up considerably through late July and Aug to support kharif planting pace.
Sub divisional rainfall distribution is similar to that seen during 2006 SW Monsoon.
Source: IMD
* As of Sep 27, 2016

3. All India Acreage Crop Status (Sep 16, 2016)
The main issues which have dominated the planting decisions included
Market returns and increase in government support prices (Increase in Pulses acreage),
Drought resistance of a crop (Increase in maize planting, acreage at +9% y-o-y and 13% above 5 yr average)
Water availability (Fall in cane acreage)
Disease resistance (Fall in cotton area on account widespread farm income losses last year due to whitefly attack on cotton crop)

4. Kharif Crop Production Scenarios
Source: GoI, IMD, Phillip Commodities Research
# lakh bakes (170 kgs), * million tonnes
According to Government of India’s first advance estimates, Kharif food grain output is expected to reach 135 mmt, 9% higher on year and a new high. Rice, Maize, Pulses, Tur output is expected to reach new record.
We examine two production scenarios, as presented in the above table.
Scenario 1, normal yield * acreage and Scenario 2, yield for 2006 * acreage (The comparison with 2006, has been offered on account of similar SW Monsoon distribution across main regions where North East, North West, Southern peninsula witnessed below normal rainfall while central India witnessed above normal rains )

5. Kharif Crop Production Scenarios
Source: GoI, IMD, Phillip Commodities Research
# lakh bakes (170 kgs), * million tonnes
For kharif 2016, pulses output is expected to witness sharp improvement in production and lower prices on account of both improved acreage which was 29% above year ago levels and 35% above 5 year average, as well as fairly good distribution of rainfall. The risks remain in form of late surge in rainfall as the pulses, such as urad and moong are nearing harvest stage.
Coarse cereals output, particularly that for Maize, is pegged at mmt in first advance estimates. However, considering dry weather impacted in few southern states such Telengana, Karnataka and concerns over late surge in rainfall during harvest time, there is a possibility that the crop output estimates may be trimmed. The fall in output however may not be as drastic as that seen in and as the harvest improves and due to lack of export prospects, domestic prices should cool off.
Sugarcane area has declined and the output is expected to decline 7% on year to mmt in Current domestic sugar spot prices reflect the expectations for a fall in output. Sugar spot prices may witness marginal improvement considering the festival month ahead, but thereafter are likely to remain stable.

6. Kharif Crop Production Scenarios
Source: GoI, IMD, Phillip Commodities Research
# lakh bakes (170 kgs), * million tonnes
first adv estimates for cotton has baffled the industry, as they reflect a higher on year output despite an 11% decline in area. Weak rainfall in largest producer Gujarat and other important producers such as Rajasthan may have negative bearing on output. There have been reports for pest attacks however not as widespread as seen in Cotton spot prices are expected to increase post harvest period towards Feb-March 2017.
Oilseeds is expected to see increase in production by 4 to 5 mln mt both according to GOI and private estimates. Additionally with import duty cut for CPO and refined oil by 5%, announced on Friday, despite upcoming harvest arrivals, price trend for oilseeds will be weak unless Rabi oilseed production witness weather disruptions.

7. Food Inflation is expected to remain muted going forward.
CPI Food Inflation
Source: GoI, Phillip India Equity Research
Food Inflation is expected to remain muted going forward.
Trend indicates that food inflation tends to drop from Dec onwards. Improved pulses, cereals and oilseeds production and current government’s increased push for improving supply chain efficiency points towards downward trend for food inflation.

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