Uneven rainfall distribution may cause supply shock in crop prices, says ICICI Bank report

NEW DELHI: The uneven rainfall distribution across various states in the country implies a near-term supply shock in prices of key crops, according to a report by ICICI Bank. The report highlighted that crop damage in certain regions, where rainfall has been deficient, could lead to upward pressure on prices.

According to the report, several states have received excess rainfall. Rajasthan recorded 118 per cent above the Long Period Average (LPA), Madhya Pradesh received 57 per cent above LPA, Gujarat saw 48 per cent above LPA, and Haryana received 24 per cent above LPA. In contrast, Karnataka (8 per cent above LPA), West Bengal (4 per cent above LPA), and Chhattisgarh (3 per cent above LPA) have received normal rainfall.

“The divergence in rainfall distribution implies a near-term supply-shock in prices of key crops that are produced in affected areas, due to crop damage”, the report stated.

On the other hand, key agricultural states such as Bihar (42 per cent below LPA), Telangana (22 per cent below LPA), Andhra Pradesh (15 per cent below LPA), Tamil Nadu (6 per cent below LPA), Maharashtra (3 per cent below LPA), Punjab (2 per cent below LPA), and Uttar Pradesh (2 per cent below LPA) have received lower-than-normal rainfall.

Despite the uneven rainfall, the report mentioned that the kharif sowing has shown positive growth. Out of the normal sowing target of 109.7 million hectares, 70.8 million hectares have already been sown, compared to 68.0 million hectares in the same period last year. Last week alone, the sown area was 59.8 million hectares.

India’s cumulative rainfall, as of July 21, stands at 374 mm, which is 6 per cent above the long-term average. However, this is a decline from the 9 per cent surplus recorded last week, mainly due to reduced rainfall in the Central and Northeast regions of the country.

The report suggested that while overall kharif sowing is progressing well, the divergence in rainfall could impact crop production in rain-deficient regions and may lead to supply-side price pressures in the near term. (ANI)