Amid pandemic, better prices for key winter crops bring relief
New Delhi: As an unstoppable pandemic begins weighing on the economy, agricultural mandis or wholesale farm-produce markets are witnessing a fortuitous rebound, offering higher-than-benchmark minimum support prices (MSP) to farmers for key winter staples, cushioning farm incomes.
Cultivators are receiving nearly federally fixed floor prices for wheat at private markets since winter harvests began on April 1. Farmers have also got up to 10% higher rates than MSP for mustard, gram, lentils, barley and rapeseed, wholesale price data from Agmarknet, an official platform, shows.
Better farm-gate prices come as good news for a country battling a paralysing second wave of Covid-19 infections which have squeezed incomes. Nearly half of all Indians depend on a farm-based livelihood.
Unprofitable prices have been the bane of farming for long. Prices of primary articles not supported by government procurement have been up to 40% lower than floor prices for winter crops in recent years. An MSP for a crop is the federally determined price that promises minimum 50% profit over cost of cultivation.
A law guaranteeing MSP has been a key demand of farm groups who are opposing three central laws passed last year with the aim to liberalise the farm economy.
According to Agmarknet data, between April 1-18, mustard prices nationally were 22% higher than MSP. Wheat was trading at near-MSP levels. Countrywide, it was 1.5% below the MSP rate in the week ended April 15, and then picked up, the data showed.
In Madhya Pradesh and Punjab, the two biggest producers, wheat was selling at a rate equal to MSP in private markets.
The Union government has set a target of procuring 43 million tonne of wheat, which is 40% of the total output. Prices are likely to firm up as procurement levels go up.
Till April 27, the Centre had procured 23.2 million tonne of wheat from 2.22 million farmers at an MSP value of ₹43,916 crore, according to farm ministry data.
Lentils were trading 8% above MSP during the same period (April 1-18). The all-India wholesale rate for gram was 1.2% short of MSP, but in major growing states, such as Madhya Pradesh, the produce was selling at 2% above MSP. In Rajasthan, mustard crop was selling at 26% above the MSP rate, the data showed.
Analysts say the current upswing is partly the result of higher global commodity prices and import duties on items such as edible oils.
The global FAO Food Price Index released on April 8 averaged 118.5 points in March 2021, 2.1% higher than in February. The rise marked the tenth consecutive monthly increase to its highest level since June 2014. The increase was led by strong gains in vegetable oils, meat and dairy subindices, while those of cereals and sugar subsided.
“These factors have helped firm up prices this season. Global prices are always a big cue for domestic prices,” said Abhishek Agrawal of Comtrade, a commodities trading firm.
In 2020, when a harsh lockdown stoked a countrywide recession, the agriculture sector showed resilience to register positive growth. It grew 3.4% in the June 2020 quarter, when rest of the economy registered a 24.4% drop. All-India growth returned to positive territory in the December 2020 quarter, the latest available data, expanding 0.4%. Agriculture grew at 3.9% in the same quarter.
According to a CRISIL Ltd note this week, agriculture is expected to remain resilient to economic shocks from surging Covid-19 cases because of a projected good monsoon and adequate inputs.