We noted the issues with India's monsoon season 2 months ago [Aug 7, 2009: India's Growth May Suffer Due to Weak Monsoon Season], but now it seems clear the rains just did not come this year. That said, the Indian market seems to care less.
After some consolidation, sugar continues to be a star. [Aug 31, 2009: Sugar - it's like AIG, Except you Actually Need It]
- India’s monsoon rainfall, the main source of irrigation for the country’s 235 million farmers, is the weakest in more than three decades, threatening farm output in the world’s second-biggest producer of rice, wheat and sugar.
- Falls in the June-September season are 23 percent below the long-period average, the most since the 23.9 percent deficit in 1972.
- Sugar jumped to a 28-year high amid forecasts that India, the biggest user, will remain the largest buyer after a drought in half the nation hurt crops of cane, rice and oilseeds. Rains returned in mid August, following a driest June in eight decades, filling up lakes and aiding efforts by Prime Minister Manmohan Singh’s government to lift winter-sown crops including wheat.
- “The government will now need to put all its efforts in salvaging the winter agriculture production,” said Dharmakirti Joshi, an economist at Crisil Ltd., a unit of Standard & Poor’s.
- The monsoon-sown rice production will fall 10 million tons from last year’s record as inadequate rainfall forced farmers to pare acreage by 6.1 million hectares. Duty-free imports of white sugar will be permitted until May or June, extending an earlier exemption, to bolster supplies, Farm Minister Sharad Pawar said last week. The nation may have a shortfall of 8 million tons in 2009-10 season, Czarnikow Group Ltd. said this month.
- The impact of falling farm output on economic growth and consumer spending is likely to be countered by the government’s actions to support incomes of the rural and urban poor, Crisil’s Joshi said. Food prices will be pressured by drought, he said.