Impact of monsoon on Indian Feed Industry

Demand for water has been rising since last few decades mainly due to expanding agriculture, increasing population, growing industrialization, and rising standards of living. A normal monsoon phase has a significant positive impact on the agricultural sector and lives dependent on it, hence the nation’s GDP. The IMD has forecast for above normal monsoon earlier this month, with country as a whole expected to receive good rainfall.
The monsoon has been poor in last two years thus increasing prices of essential commodities like pulses and vegetables. Since prices of Agro commodities go up during water crisis or drought situations, the animal feed industry also suffers. A drought in India generally creates a shortage of coarse grains used in animal feed, resulting in feed shortage or increase in import demand. Traditionally, India exports corn and meal to Southeast Asia. However, growing demand for poultry and dairy products has enhanced the domestic usage and country’s export share of feed ingredients has already reduced drastically.
A poor crop outlook for coarse cereals also results in reducing the fodder supply. This situation may force government to allow import of fodder in order to meet the deficit. As a result, the country’s import bill increases and adversely affects its economic growth.
Monsoon forecast
As per weather reports the Southwest Monsoon had hit the coasts of Kerala on 8 June against the earlier estimated date of 7 June. Till now it has covered Southern, Eastern and Central part of India. Rainfall across the country for the current season (11 June-21 June) was 25% less compared to normal rainfall of 90mm, but the deficit had reduced to 9 percent in recent weeks. All in all, the IMD has forecasted that the country will receive above-normal rainfall, or 106% of LPA for the current season. While expecting overall monsoon to be better than normal in the current year, the government is targeting a record foodgrain production of 270.10 million tonnes in 2016-17.
It may be noted that the Southwest Monsoon was below normal in 2015 and because of the El Nino effect, therefore rainfall across the nation was poor. The impact of El Nino began in April 2015 and reached its peak in December 2015. The impact started declining thereafter and became moderate in early April this year, finally weakening by early May.
According to The India Meteorological Department, the monsoon seems to be stuck over a small arc covering Gujarat and West Rajasthan over the past few days as it waits to run through the last base to establish coverage over mainland India. Heavy rain were reported over west Rajasthan and adjoining Gujarat during the first week of July, and the rains were forecasted to sustain over Central and adjoining North-West India for the next few days given the presence of helpful atmospheric systems (low-pressure areas and other circulations). The Department also projected heavy to very heavy rain over at a few places over Gujarat, isolated places over east Rajasthan and west Madhya Pradesh; heavy at isolated places over Himachal Pradesh, Uttarakhand, west Rajasthan, east Madhya Pradesh, Saurashtra and Kutch for the same period.
Present status of crops
According to the latest update from the Agriculture Ministry, net cropped area till 8 July stood at 406.27 lakh hectares as compared to 431.82 lakh hectares last year, during the same period. The details of area covered so far and its comparison to last year is shown in Table1.
As per recently released reports from the USDA, Indian oilmeal export in MY 2016/17 is forecast to rise moderately versus last year, i.e. from 1.3 MMT to 2.6 MMT, assuming normal market conditions. Indian oilmeal production in MY 2016/17 is expected to recover to a more normal level of 15.4 MMT.
s1Similarly corn production for MY 2015/16 remains unchanged at 21 MMT based on the reports of good harvest of Rabi corn in the eastern states. Based on the recent MOA’s third advance estimate, MY 2014/15 sorghum and millet (largely Kharif crops) production estimate has been revised lower on lower acreage and yields. Sorghum production is estimated at 5.5 million tonnes versus 4.6 million tonnes in 2014-15.
s2The monsoon rains are important for 55 percent of Indian farmland that does not have irrigation area and is considered deficient. The four-month season accounts for 75 percent of India’s annual rainfall and roughly 50 percent of that is usually delivered in June and July. Till now the weather department has projected a better monsoon year for 2016, but it will be too early to arrive at any conclusion. It will take few more weeks at least to assess the monsoon situation. Better monsoon performance will be beneficial to the Animal feed industry on the whole offsetting the requirements of the domestic feed industry and adding value to the country’s trade bill in terms of export of feed raw materials. The government should carefully monitor the monsoon performance for next couple of months, and respond promptly, in case of any adverse situations.

by Abhijeet Banerjee, Religare Commodities