By G. Chandrashekhar
August 2024
Much water has flowed under the (Indian) bridge since my last report in April 2024. After the national election results in early June, the new Indian government is largely the same as before, except there is a new Minister for Agriculture and a new Minister for Food and Consumer Affairs.
Currently India is in the midst of the Kharif planting season. The India Meteorological Department has forecast a “normal to slightly above normal” rainfall for this Southwest monsoon season that runs from June to September. After early onset, progress of monsoon stalled for over two weeks that left June rains in deficit.
Fortunately, copious rains in July have substantially reduced the deficit and so planting of pulse crops is accelerating. Major Kharif season pulse crops are tur/arhar (pigeon pea), urad (black matpe), and moong (green gram).
As of July 26 (the latest available weekly report of estimated planted area at the time of writing), planting has been completed in 10.2 million hectares, 14% higher than this time last year’s 8.9 million hectares. The five-year average for Kharif pulses area is 13 million hectares. We still have some way to go, but the planting window may close in less than ten days.
Specifically, the sown area for pigeon pea is 3.85 million hectares, substantially higher than 2.87 million hectares this time last year. This progress is attributable to price signals from the open market that growers have picked up to expand the area for this crop. The five-year average planted area for pigeon pea is 4.5 million hectares.
In urad, the planted area is an estimated 2.31 million hectares, slightly lower than 2.39 million hectares this time last year, while the five-year average area is 3.7 million hectares. In moong, the planted area so far is estimated 3.04 million hectares, up 12% from 2.7 million hectares last year, with five-year average at 3.7 million hectares.
To incentivize pulse production and advance growers’ welfare, the government has hiked the minimum support price (MSP) for pulses this season. For pigeon pea MSP is fixed at INR 7,550 per quintal (100 kilogram marketing lot), equivalent to roughly $909 USD per tonne. The price hike is INR 550 per quintal, equivalent to about $66 USD per tonne.
MSP for urad this season is INR 7,400 per quintal ($891 USD per tonne), up by INR 450 ($54 USD per tonne). For moong the MSP is fixed at INR 8,682 per quintal ($1046 USD per tonne), up by INR 128 (roughly $15 USD per tonne).
The target for production of Kharif pulses for 2024-25 is set at 9.5 million tonnes with pigeon pea target placed at 4.5 million tonnes. On current reckoning, the production target may not be achieved. There is risk, like in June, rains in August may be deficient.
Be that as it may, despite liberal import of pigeon pea, black matpe, and lentil as well as strict enforcement of stock limits for value chain participants, open market prices of major pulses (chickpea, lentil, pigeon pea, and black matpe) continue to defy gravity in India and rule above the minimum support price.
The only saving grace seems to be yellow pea, the import of which is estimated to have reached two million tonnes. This burdensome inflow has led to a sharp downward correction in YP prices. YP import (Bill of Lading date) has been extended to October 2024.
A question I am often asked is whether the Indian government would continue to allow YP import beyond October. My strong belief is that by end-August or early- September, the government would comprehensively review the pulses situation taking into account the progress of monsoon, Kharif crop prospects, open market prices, overall food inflation, and related matters. A call would be taken based on the market assessment at that time.
While liberal import of pigeon pea, black matpe, and mung continues until March 2025, YP import policy will need a review because of its perceived impact on chana (chickpea) production.
India will celebrate a series of festivals from mid-August to end-October where the demand for food, including pulses, goes up manifold. Food price trends during the festival season will be driven by the progress of Southwest monsoon and harvest prospects. August to September is usually a period of anxiety for all stakeholders – growers, traders, and policymakers – a it presents a “make-or-break” situation.
This year it is trickier because the anticipated La Niña is likely to be somewhat delayed and may occur in October and not earlier. By then, the Kharif crops would mostly be ready for harvest.
While the government usually releases the Kharif crop production estimate by end-September, I propose to release my own production forecast two weeks earlier say by mid-September as I usually do.
On July 23, the Indian Finance Minister presented the first budget of the new government. For the farm sector, the government’s policy focus would be on productivity and resilience. The government is keen to transform agricultural research to rise productivity and fight climate change.
Like in previous budgets, strategies for boosting pulses and oilseeds (facing chronic shortfall) production and storage of cargo received a mention. My own view is that we in India know the problems and we have a clear understanding of the solutions. The challenge is the lack of “political will” to move away from “business-as-usual” mindset and boldly go for “creative disruption”.
G. Chandrashekhar is a Mumbai-based Economist, Senior Editor and Policy Commentator with agribusiness and commodity markets specialization. He provides policy inputs for the Indian government. He is an Independent Director on corporate boards and an Independent Member of Indian market regulator’s committee SEBI-CDAC. Views are personal. He can be reached at gchandrashekhar@gmail.com.
