Kharif rice output may see a shortfall of 17 million tonne

Kharif rice output may see a shortfall of 17 million tonne

28 Oct 2009, 0623 hrs IST, Prabha Jagannathan, ET Bureau

NEW DELHI: The shortfall in kharif rice output for 2009-10 may be closer to the 17 million tonnes (mt) estimated by the US Department of
Agriculture, compared to only 10-12 mt projected by the government in September. This will bring down the total annual output in the year to only 82 mt against an yearly average consumption of 89 mt, spelling a supply shortfall of seven million tonnes and possible hardening of prices.
Rice production in 2008-09 was a record 99.2 mt and government procurement, a record 33 mt. Government officials confirmed estimates of a 16 mt kharif rice shortfall, reiterating similar suggestions by the finance minister Pranab Mukherjee earlier.
Trade analysts, however, contend that the healthy foodgrain stocks (including a strategic reserve of five million tonnes) and high expectations of a bumper wheat crop this rabi could ensure that the foodgrain shortfall will be only five million tonnes.
'The 89 mt consumption average on which the government works yearly is fungible to an extent. Parts of the country switches between rice and wheat. So, the country can live with a 2-3.5 mt shortfall but the rest may have to be imported," an analyst told ET.
Indications are that the government, which notified the reduction of import duty to zero level (up to September 2010) last week on apprehension of a sharp rice production drop, may choose to either allow select state units to import just enough to beef up the PDS/welfare needs or import on a government-to-government basis.
Interestingly, Thailand, the world’s biggest rice exporter, announced plans on Tuesday to sell 950,000 tonnes of rice from its stocks through government-to-government deals by the end 2009. Agencies quoted Thai commerce minister Nakasai as saying: "Our strategy is to drain rice (stockpiles of 6 mt of rice bought from farmers through rice intervention schemes) out of the country in a bid to lift domestic prices during the (year-end) harvesting season." Another 1.8 mt of rice will be released in 2010.
But trade analysts point out that negotiating with Thailand for 25% broken rice, the price of which shot up from only $375/tonne to $414/tonne by October 21, may prove unviable. The landed price would work out to around Rs 24/kg for Thai rice. This could become a politically dicey since the government’s price for rice procured from Punjab works out to Rs 14/kg. Even with a bonus, that could work out to only Rs 17/kg, way lower than the Thai rice price.
Instead, sector watchers maintain, India could choose to negotiate a government-to-government rice import deal with Myanmar or Vietnam. Import negotiations through government-to-government deals on rice are less transparent and are perceived as allowing a larger leeway, both politically and price-wise, to the government.
To keep foodgrain shortfall to the minimum, the farm ministry is targeting a bumper wheat production this winter and an output of 16 million tonnes of rabi rice production.