Govt must prepare for record-high rabi crop harvest

Govt must prepare for record-high rabi crop harvest

While it is heartening to note the record acreage reported for major rabi season crops including wheat, pulses and oilseeds, there is now a growing concern over the government’s ability to respond to the harvest in terms of procurement and defending the minimum support price (MSP) or preventing farm-gate prices from collapsing.

Wheat acreage has reached a new high of 34.5 million hectare (mha) in Madhya Pradesh which saw record procurement last season. The wheat production target indicated by the government is at 106.5 million tonnes (mt) for 2020-21. Subject to normal weather, the harvest is sure to exceed 100 mt. The government’s output estimate last year was 107.6 mt, but trade estimated the crop size lower at 97-98 mt.

A similar situation may arise this season, too. The massive wheat crop is sure to pose challenges for policymakers in terms of procurement, storage and movement. Procurement of 40 mt cannot be ruled out. The pulses story is turning out to be no different. Area planted at 16.5 mha is a new high. Chana (gram or chickpea) has done exceptionally well with 11.1 m ha, followed at a distance by masur (lentil) with 1.65 m ha and fieldpea 1.1 mha.

The production target for pulses this season is at 15.7 m t. On current reckoning, pulses harvest this rabi season may well exceed 13.0 mt and possibly test 14.0 m t.

Among oilseeds, rapeseed/mustard area planted is a record 7.4 m ha. The prospect of the crop size touching 9.0 m t is bright, although trade is now talking about 10 m t which may be an exaggeration.

Price support

Record harvest of wheat, pulses and oilseeds is sure to throw price support and logistics challenges. For example, wheat spot prices are already well below the MSP of ₹1,975/quintal in some mandis. Similarly, at ₹4,500-4,700/quintal of chana/gram is ruling below last season’s MSP of ₹4,875. For the upcoming harvest, chana MSP is fixed at ₹5,100/quintal. With heavy arrivals there is risk of a price collapse towards ₹4,000.

Oilseed rates are currently supported by a price rally in the global markets; but the rally is likely to peter out by March/April which will put downward pressure on Indian oilseeds and vegetable oils. The prospect of a large rapeseed/mustard harvest (MSP ₹4,650) will exert downward price pressure as demonstrated by the declining forward prices in the derivatives exchange.

Simply put, for New Delhi, the management of a large harvest in terms of price support and procurement is going to be daunting. It is best preparations are started soon.

(The author is a policy commentator and agribusiness specialist. Views are personal)

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