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Amid Government’s Desperate Measures For Rice Procurement, Rice Production Expected To Remain Low- USDA Estimates

Cabinet committee on economic affairs has increased the MSP of various agriculture commodities and the government has started with the rice procurement in a very strong manner for the marketing year 2017-18. Despite all the efforts, farmers still practice in traditional terms which indicated lower production of rice in coming year – An estimation by United States Agriculture Department for India’s rice production.

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As per the new release estimated by foreign agriculture service of U.S. Department of Agriculture for the rice sowing and production marketing year (MY) 2017-18, milled rice production is expected at 107.5 million metric tons (MMT). This is due to lower than expected planting and yield and suboptimal weather conditions during the critical growth stages in some rice-growing states. MY 2017-18 rice export has been estimated to be lower at 11.5 MMT on a forecasted tight supplies.

Government’s Procurement with Strong Nodes

Government’s rice procurement begun on a strong note. Government procurement of MY 2017-18 rice under the minimum support price (MSP) is slightly ahead of last year on timely harvest and good yield realization in the northern states. Rice procurement through October 23rd 2017, is estimated at 8.6 MMT compared to 8.3 MMT during the corresponding period of MY 2016/17. Most of the procurement is from the northern states of Punjab (5.4 MMT vs 5.4 MMT last year) and Haryana (3.1 MMT vs 2.8 MMT last year), and will gradually spread to other states from November onwards.   Based on the production and procurement estimates suggested by various states, the government has set the MY 2017-18 Kharif rice procurement target of 37.5 MMT compared to MY 2016-17 Kharif rice procurement of 34.5 MMT (initial target 33 MMT). Market sources report that government procurement is unlikely to reach the target level of expected lower procurement from eastern and southern states on expected lower yields compared to last year.

Increase in MSP

On 24th October, it was reported that the Cabinet Committee on Economic Affairs raised the minimum support prices (MSP) for the upcoming Rabi crops for the Indian crop year 2017-18 (July-June), which will be harvested and marketed in the MY 2018-19 (April-March). The MSP has been fixed based on the recommendations of the Commission for Agriculture Cost and Prices (CACP) to ensure farmers receive sufficient profits and cover the cost of production.   

The MSP for wheat has been raised by Rs 1,100 per metric ton (MT) over last year to Rs 17,350 per MT.  This increase has come on the back of Rs 1,000 per MT increase last year MY 2017-18 compared to the increase of Rs 500-750 per MT in previous years (which was MY 2012-13 to MY 2016-17).  The MSP for barley has been raised by INR 850 per MT to 14,100 per MT, chickpeas by Rs 4000 per MT to INR 44,000 per MT and lentils by INR 3000 per MT to Rs 42,500 per MT.

Despite the higher MSP increase for pulses (chickpea and lentils), Indian farmers preferred to produce wheat over pulses, where substitutable, given a guaranteed government procurement program for wheat.  Consequently, the significant increase in MSP is likely to support higher planting of wheat for the upcoming MY 2018-19 wheat crop.  However, irrigation water availability and soil moisture content at the time of planting (October to Mid-December) may affect overall planting prospects in the partially irrigated states (Uttar Pradesh, Madhya Pradesh, Rajasthan).

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