MSP hike: Cotton, oilseeds to take over pulses' acreage this kharif season

Cotton and oilseeds are likely to take over a significant part of pulses’ acreage this kharif season due to a sharp increase in their minimum support price (MSP) for the current season coupled with better price realisation last year.

As against the MSP of Rs 5,400 a quintal for 2017-18 kharif season, average urad price stood at Rs 4,720 a quintal for May 2017, which steadily declined further to stabilise at Rs 3018.5 a quintal towards the beginning of the current sowing season in May 2018. Similarly, arhar and moong also traded substantially below the MSP throughout 2017-18 season. 

By contrast, however, soybean and cotton prices traded substantially higher than their respective MSPs, barring a couple of occasions when they slipped marginally below the government’s threshold price. Encouraged by the government’s timely interventions, spot prices of cotton and soybean along with other oilseeds moved higher. 

“Sowing area and production of pulses are set to contract this kharif season due to lower realisation yielded by farmers last year. By contrast, however, sowing area and production of oilseeds and cotton may rise this year,” said Sanjay Kaul, managing director, National Collateral Management Services (NCML).

Based on lower acreage so far this season, NCML forecasts India’s pulses production to decline by 7.7 per cent at 8.32 million tonnes (mt) this kharif season, second slump in a row, compared to 9.01 mt produced last year as per the third Advanced Estimates for 2017-18 from the Union Ministry of Agriculture.

In a first-of-its-kind of kharif crop production forecast, NCML estimates oilseeds and cotton output to rise by 9 per cent and 7.6 per cent to 22.57 mt and 37.5 million bales (1 bale = 170 kg) this year, from 20.68 mt and 34.86 million bales last year, respectively.

“The MSP hike is insufficient to encourage farmers to bring in sowing under pulses. Compared to pulses, paddy, jowar, cotton, and oilseeds offer better prospects. But, pulses procurement by government agencies might encourage farmers to bring in some area next sowing season,” said D K Joshi, chief economist, CRISIL.

The data compiled by the Union Ministry of Agriculture showed a sharp decline in sowing area under all primary kharif crops, including pulses, cotton, and oilseeds due to erratic rainfall this monsoon season. Despite a normal long period average (LPA) forecast, the monsoon rainfall took a break of nearly 10 days after initial showers early this season. Feared with crop damage, the government of Maharashtra advised farmers in the state to wait for actual rainfall before commencement of sowing this kharif season.

Normally, farmers switch to pulses during deficient rainfall, which is highly unlikely this season.

Reacting to the MSP hike, chana prices moved up by 1 per cent across all contracts and soybean prices declined by up to 1.72 per cent towards the end of day trading on Wednesday.

Trade sources, however, believe that the Centre and the state need to come together to devise a formula for sharing incentives for farmers. 

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel