Kharif Season Estimates of Agro ProductionImpact: Positive (Agro
Based Industry); Positive (Rural Consumption); Positive (Inflation)Brief: The 4thestimate of FY18 Kharif production - estimates that food grain production has
increased by 1.8% (as compared to 0.3% in the 3rd Estimate). For
FY19, Acuite' estimates production to increase by 0.9%. Area sown has however
come down by (-) 0.5% in FY18 and has further come down by (-) 1.3% in FY19.
The largest increase in yields is seen in Sugarcane as well as Cotton
production in FY19.As per Ministry of Agriculture's 4
th estimate, sown are
in the Kharif season has come down by (-) 0.5% in FY18 and further declined by
(-) 1.3% in FY19. For Foodgrains as a whole, the area under sown came down by
(-) 1.7% in FY18 and (-) 2% in FY19. At 12 million hectares, the area under
sown of Cotton has seen the maximum increase in FY18 (16.7%). However, this
declined by (-) 2.4% in FY19, currently sitting at 11.7 million hectares. Other
significant changes were seen in Oil Seeds (-) 8.1%, Cereals (-) 1.6% and
Pulses (-) 2.3% in FY18. In FY19, these figures stand at 52.3 million hectares
((-) 2%), 13.1 million hectares ((-) 2.3%) and 16.7 million hectares (1.7%)
respectively, category wise. We see these declines primarily driven by
Government land acquisitions for the creation of road infrastructure and
urbanization (land usage for housing, retail complexes and other purposes).
In terms of yields however, we see a positive impact in almost all
categories. According to our estimates, the biggest beneficiaries have been
Cotton and Sugarcane, which will witness 16.1% and 17.9% increase in production,
respectively. The two categories have benefited from higher MSPs, which were
increased by 27% for Cotton and 8% for Sugarcane. The latter also saw positive
sentiment from the optimized payment mechanism initiated by states for the
timely release of funds to Sugarcane farmers. The next big beneficiary has been
Oilseeds, which has been reeling under significant inflation at the wholesale
level (WPI). The category recorded a YTD WPI of +8.3% in FY19 while contracting
by (-) 11%, the previous year. The MSP for the Oilseeds category has increased
by 15% for the current year – translating into rising yields. We therefore
believe that the higher MSP and the resultant impact on production/ yields will
calm the supply side and act as anti-inflationary.
In terms of absolute production differential, we estimate that
Sugarcane production will be higher by 674 lakh tons in FY19. Cotton, the next
big gainer, will experience a bumper differential of 56 lakh bales, further
reducing the input cost for textile related industries. Oilseeds on the other
hand, will see an increase of over 3 lakh tone, this season over same time last
year.
Area in Million Hectare
(Kharif Season)
|
Area under sown |
% age change |
|
FY17 |
FY18 |
FY19 |
FY18 |
FY19 |
Agricultural products |
101.4 |
100.9 |
99.6 |
-0.5% |
-1.3% |
Foodgrain |
67.9 |
66.8 |
65.4 |
-1.7% |
-2.0% |
Cereals |
54.2 |
53.4 |
52.3 |
-1.6% |
-2.0% |
Rice |
36.0 |
36.0 |
35.7 |
-0.2% |
-0.7% |
Pulses |
13.7 |
13.4 |
13.1 |
-2.3% |
-2.3% |
Sugar cane |
4.6 |
5.0 |
5.1 |
9.2% |
1.5% |
Oilseeds |
17.9 |
16.4 |
16.7 |
-8.1% |
1.7% |
Cotton |
10.3 |
12.0 |
11.7 |
16.7% |
-2.4% |
Production
in Lakh Tons (Kharif Season)
Agricultural products |
Production |
% age change |
|
FY17 |
FY18 |
FY19* |
FY18 |
FY19* |
Food grain |
138.28 |
140.72 |
142.0 |
1.8% |
0.9% |
Cereals |
128.7 |
131.38 |
133.5 |
2.1% |
1.6% |
Rice |
96.3 |
97.5 |
98.2 |
1.2% |
0.7% |
Pulses |
9.58 |
9.34 |
9.1 |
-2.5% |
-3.1% |
Sugar cane |
3060.7 |
3769 |
4443.1 |
23.1% |
17.9% |
Oilseeds |
215.13 |
209.9 |
213.0 |
-2.4% |
1.5% |
Cotton# |
325.7 |
348.8 |
404.8 |
7.1% |
16.1% |
#
is lakh bales of 170 kg