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Good monsoon will lower your food bill

Adequate rainfall is expected to result in a higher foodgrain output that, in turn, will lower food prices, reports Suman Layak.

india Updated: Aug 12, 2007 03:20 IST
Suman Layak
Suman Layak
Hindustan Times

It's been a good monsoon and it's set to lower your food bills. Adequate rainfall and the area under cultivation for this year's Kharif season — 79.28 million hectares, the highest since 1990 — are expected to result in a higher foodgrain output that, in turn, will lower food prices.

Inflation, a major worry over the last year, was fuelled by costly foodgrain, forcing the Reserve bank of India to cut money supply to rein in prices. The floods across the country, say experts, are unlikely to have an adverse impact on food prices as they seem to be more a human tragedy than an agricultural one.

Madan Sabnavis, economist with the National Commodities and Derivatives Exchange of India (NCDEX) explains: "Many rice-growing areas are inundated, but paddy needs flooding to an extent. Also, crops can be re-sowed even now, so the damage can be undone."

Commodity traders, who track the latest monsoon and agricultural data from across the country, agree. Unopam Kaushik, head of commodities at Anagram Stockbroking, said: "This might be the best monsoon in five years. Most of central, western and northern India received rain within a three per cent band off the average, which is absolutely fine. Only in Tamil Nadu, Kerala and Andhra Pradesh is there a problem with the distribution of the rain."

Some food prices are already dropping. Spices like jeera (cumin) and turmeric, as well as channa (chickpeas) and soyabean, are getting cheaper on the spot market as well as in futures contracts for deliveries in August, September and October.

However, the price drop is likely to be more noticeable in paddy, cotton, sugarcane and pulses when these are harvested later. Edible oil prices may stay steady, despite raised production, because of a shortage in the US market. KL Rehman of IL&FS Investment said: "Prices of pulses and spices are already under pressure. Even rubber and sugarcane prices will drop."

"Also, land under Kharif crops has increased this year. Soya, for instance, has 81.4 lakh hectares this year compared to 72.4 lakh hectares last year."

This year, land under moong cultivation has risen by 24.5 per cent.

The picture will clear by August end but even a dry spell now will not hit Kharif. What might be a problem are rains in late September, as was the case in 2000 when a good harvest was ruined.

First Published: Aug 12, 2007 03:01 IST