Indian crop estimate to steer sugar, grain markets                                              

Mon, 02 Nov 2009 03:33:03 GMT

 By Ratnajyoti Dutta

NEW DELHI - India's summer-sown harvest may have fallen at least 10 percent this year, setting the stage for large sugar imports, the country's first imports of rice in decades and record vegetable oil imports.

The farm ministry is expected to issue its first formal estimates of summer-sown crops next week, which will signal the extent to which the country's billion-plus people will consume imported farm commodities.

Farm output is set to plunge after the worst monsoon rains since 1972 dried up fields where rice and cane were sown in the northern Uttar Pradesh, while unseasonal rains earlier this month flooded key rice- and corn-growing southern states.

"We expect a roughly 10 percent decline in summer foodgrain output," a senior farm ministry official, who did not wish to be identified, told Reuters.

Industry official say India's move to abolish import taxes on rice, and plans by state firms to start importing the staple, signal a bigger-than-expected drop in output.

India initially estimated a fall of about 10 million tonnes in rice output, but the U.S. Department of Agriculture on Monday forecast a 15-17 million tonnes decline from last year's record output of 99.2 million tonnes.

"Removal of rice import duty reflects the demand-supply mismatch. Import (of rice) is the need of the hour," Venkat Chary, the chairman of the Multi Commodity Exchange, told Reuters.

Chary, a former bureaucrat, also said the government should ease controls on commodities such as sugar to allow market forces to operate freely.

Analysts said rising prices in recent weeks were another indicator of falling crop output.

"Recent rise in food prices reflects the likely shortfall in summer sown food crops," said S. Raghuraman, head of research of Agriwatch, a commodity research firm.

SOYBEAN

India's soybean crop, which saw no rainfall for three crucial weeks during the planting season, will suffer the brunt of the dry weather.

Soybean output is forecast to drop 9 to 19 percent, and may hit soymeal exports from India, Asia's leading supplier of the animal feedstock.

Sowing of winter rapeseed crop has also been delayed because of dry soil and high temperature, but in some regions, mainly the wheat-growing states in northern India, late rainfall has helped, brightening prospects of a strong winter-sown crop.

"Late rains will help the winter sowing, but the temperature in February-March holds the key for the extent of food imports next year," said L.S. Rathore, head of the Agromet division of the India Meteorological Department.

Cane area in Uttar Pradesh, the country's top cane producing state, has fallen 17 percent, and expectation of lower cane supply resulting in lower sugar output and higher imports pushed global sugar futures to 28-1/2-year highs this year.

Heavy rains in early October had flooded vast areas of the southern states of Andhra Pradesh and Karnataka, which may cut India's corn output by 1.3 million tonnes, or 7 percent from 19 million tonnes in 2008/09.

"Total foodgrain production in 2009/10 will drop to 223 million tonnes from 234 million tonnes in 2008/09," said the Economic Advisory Council to the Prime Minister Manmohan Singh.

The summer season crops share about half of the country's total foodgrain output, official data showed.

India's farm minister, Sharad Pawar, says the country has adequate food stocks.

The country's rice stocks swelled to 14.5 million tonnes by Oct. 1, up 83.5 percent from 7.9 million a year ago, while wheat stocks rose by 23.2 percent, to 27.1 million tonnes, from 22 million a year ago.

(Editing by Clarence Fernandez)





(Reuters)

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