INDIAN RAINS/MONSOON DELAYED BY A MONTH-- FOOD FRONT LARGELY SAFE
Monsoon is a derivative of Arabic word Mawsim or Mausam . “Seasonal Pattern” or “Mausam” is subject to imperceptible but definitive variations. Traditional theory of southwest monsoon -summer rains- occurring in June-September over Indian sub-continent needs better understanding. Even winter rainfall--northeastern monsoon-- instead of limiting to October –December extends till Feb –March. (Recall delay in harvest of wheat this year)
Temperature differentials on land and sea are not the only causative factors for triggering and bursting monsoons. The current dynamic theory maintains that Monsoon is a global weather phenomenon rather than just a local one. El-Niño- too remains a tentative forecasting while its fear is exaggerated sometimes—as proven recently. When seasonal mutations crisscross worldwide, Monsoons cannot remain isolated and localized affair. Even Indian festivals do not occur on same Gregorian calendar dates; they are in sync with seasons.
To what extent Monsoon may have shifted requires a review by IMD/policymakers, but to an ordinary observer this appears to have been deferred by 30-40 days, barring exceptions. Sawan—the month of rain as per traditional Indian calendar, commenced on 13th July this year.
Based upon experience of Indian trading community of many years (except last year) who relate antics of trade with weather, it is believed that delay in onset of Monsoon by a month is the new norm. “Sowing starts by early July and is completed by end July—the month of sawan. The cyclic pattern has changed and we still call it a delay. Clarity on actual sowing will emerge by compilation of data by mid- August. Media frenzy and over hyped reports of possible drought and parch lands create situation of deep concern for common man which makes official machinery (nervous) creating panic in markets.” Government then acts in an arbitrary manner—blaming farmers or wholesalers or retailers or “mandis” which is inimical to trade. Random comparison of sowing data kicks speculation of shortages and ascending prices.
At the time of writing this blog on 25th July 2014, the recovery in shortfall is much faster. Deficiency is about 20%.Water reservoir levels is above 10 year average and heavy down pour is forecast in next few days.
Source economic times 25.07.2014
Decline in food inflation
Recent CSO data on CPI reveals that food inflation of cereals and fruits/ vegetables has declined between September 2013 to June 2014 from 12.8% to 7.6% and from 28.4% to 11.8% respectively. In % terms this decline is -41% and -58%. Only prices of milk and its products have climbed by 35%. Though prices jumped in absolute terms, but rate of rise is reined. This is despite the market scare of deficient rainfall—though common man may not appreciate this statistical jargon due to strong base effect. Neither media nor official agencies are able to highlight this tapered down trend.
Source Crisil Author
Despite sensational reports of weaker monsoons, there is no need to panic. Wheat is a rabi crop (winter) of 93 million tons (mts). It is not exposed to draught any way and we carry about 40 mts with FCI as of 1st July2014.
India produced 103 mts of rice in FY14. Government carries 28mts of milled rice on 1st July 2014. Kharif Rice output—which is 85% of country’s production-- is well distributed in Punjab/Haryana (well irrigated) Uttar Pradesh, West Bengal, Bihar, Chhattisgarh, Jharkhand, AP, MP, Tamil Nadu, and Kerala. There could be marginal decline of 3-4%, which can be covered in the Rabi rice crop. Rice’s Rabi crop supports 15% of overall output. Supply side of minimum 100 mts of rice plus stocks of 28 mts vs annual demand of 95 mts provides self-sufficiency for this critical crop.
Enough sugarcane will crystallize 25 mts of sugar in 2014-15 with about 7 mts of carry over. Supply of 32 mts sweetner against consumption of 23 mts is indicative of surplus/ bearishness. India’s cotton stocks are estimated at 3.3 million bales (mbs) as of October 2014 and lowest estimated produce could be 35 mbs, while higher side could be 38-39 mbs. With minimum total availability of 38.3 mbs and domestic usage of 31 mbs, local market will again be surplus/ bearish.
Availability of Oil seeds and pulses could be lower. Chana or Chick pea which is about 50% of pulse complex grows in rabi season and thus insulated from Monsoons. Edible oils and lentils/yellow peas in any case have an annual import component of 11mts and 3mts respectively. World markets of these items are plunging sharply; astute private players manage imports very efficiently. Thus, any 5%-10% increase in import of edible oils and pulses is a routine trading activity. Short term spike in fruit and vegetables front is seasonal and likely to settle down as usual.