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In an earlier episode of Business Matters, we have seen how El Nino and La Nina phenomena affect rainfall patterns and hence agriculture. 2023 saw a Super El Nino. It means that the surface temperature above Pacific waters – which is where the phenomenon occurs – has been 2 deg C above normal.
You may recall that the annual climate conference COP of 2015 had set a mandate for governments across the world to contain temperature increase to less than 2 deg above normal and if possible, to contain it at 1.5 degrees.
In February, Businessline pointed out how crop yields have a poor outlook. Let’s take a look at some key numbers, especially to do with important Rabi crops such as wheat and maize.
Why are the monsoons and crop yields important?
But before we look at the BL piece, here’s a question for you: Why would you care if wheat or mustard sowing was below par in a particular year? If that’s indeed the question on your mind right now, here’s why you should care.
If crop yield is affected either because of poor or excess rains, or because not enough sowing has taken place or the transport system is unable to get your tomatoes or onions to your neighbourhood, the cost of those items goes up. If this happens across several crops then it has an overall impact on inflation. And remember, 45% of weightage in consumer inflation data is given to food and beverages.
Once inflation goes up, you know the drill, the Reserve Bank gets into reining in mode and raises interest rates and draws out liquidity so that money supply in the system dips. The aim here is to make loans costlier so that consumption goes down, thereby lowering demand and hence tempering the rise in cost of consumption items.
Which means, your home loan, vehicle loan or education loan gets costlier. That’s why you should be as concerned about weather patterns affecting our crop as you are probably concerned about the latest match scores in the IPL.
Now, what is the outlook for key Rabi crops? Businessline quotes The Wheat Research Institute as saying that two-thirds of the area this season are planted to heat-tolerant varieties. The coming weeks are going to be a test for the new varieties to demonstrate how heat tolerant they really are.
You may recall that last year, because of multiple heat waves, crop output was impacted so badly that instead of exporting wheat, the government had to ban exports so that domestic prices could be tempered.
The writer states that wheat supply-demand fundamentals are already tight, with public stocks running at multi-year lows. Open market prices are elevated. He says if production were to fall below 100 million tonnes (mt), (compared with the government-set target of 114 mt), it could exacerbate the availability and price, and make imports inevitable.
If that happens, look at how the pendulum swings – from aspiring for robust exports, to banning exports to now the prospect of imports.
Chana, among pulses, rapeseed-mustard among oilseeds, and maize among cereals are all important rabi crops and all of them are facing moisture stress.
For those new to the term, all plants need water to thrive. But if the transpiration rate is higher than the water uptake from the soil, then the plants experience moisture stress.
Maize is especially important for the auto industry as the end user. Why? Because the govt has mandated a certain minimum ethanol to be blended with petrol and there are restrictions on the use of sugarcane for producing ethanol. If Maize crops don’t yield as much as targeted, maize imports will become reality.
So much for the sombre news. Here’s something to brighten our moods. Since that article appeared in February, El Nino conditions are abating. A note put out by the HDFC AMC citing official data says that theoretically, El Niño is associated with weakening monsoon winds and dry weather in India, while La Niña is associated with good rainfall during the monsoon season.
It says there is 83% probability of the Pacific dropping below El Niño status into “Neutral Phase” – when the ocean is within 0.5 degrees C of average – this month. This cooling is expected to continue, with latest forecasts indicating a probability of 75% for “La Niña” conditions by July 2024 – heart of summer.
It says 70% of India’s annual precipitation is received between June and September. This means that the La Nina forecast for 2024 is a significant positive for the Indian economy coming as it will in the monsoon months.
Plus, our water reservoir levels are pretty low at 43.3% of full level in February 2024 vs 54.4% a year earlier). This makes the 2024 monsoons more crucial for Indian agriculture.
Script and presentation: K. Bharat Kumar
Production: Shikha Kumari and Shibu Narayan
