Key facts
- Farmer Amarsingh Gushinge said there is not enough soil moisture to sow the next crop and no money left to do so.
- Devendra Pant of India Ratings and Research said food inflation could reach around 10% in the October-December quarter.
- Pant said he expects the central bank to raise rates by a further 50-75 basis points at its December meeting.
- Uday Singh Bayas of IPEMA-Poultry India said animal feed, mainly corn and soybean, accounts for 60%-70% of poultry production costs.
- Rahil Shaikh of MEIR Commodities India said sugar output may recover only in late 2028 if rains are favourable in 2027.
- Sugar prices have risen nearly 30% over the past year, prompting the government to allow duty-free imports of 1 million metric tons.
Below-average monsoon rains have left farmers in southern and western India short of soil moisture as they prepare to plant winter crops, Reuters reported on November 3. Amarsingh Gushinge, 78, said at Rajewadi village, about 400 km (250 miles) east of Mumbai, that there is not enough moisture in the soil to sow the next crop and no money left to do so. The Jalna district around his village received about 48% less rain than average this year, the local weather office said.
Lower crop yields could further stoke food inflation, with prices of sugar, pulses, wheat and rice already climbing amid a severe El Niño. Onions, milk and poultry products are also becoming more expensive. In September, annual retail food inflation accelerated to 7.74%, pushing headline inflation to 5.54%, close to the Reserve Bank of India's upper tolerance limit of 6%.
Devendra Pant, chief economist at India Ratings and Research, said food inflation could reach around 10% in the October-December quarter, citing weak rains, higher global prices and rupee depreciation. He said he expects the central bank to raise interest rates by a further 50-75 basis points at its December meeting, after its first hike in October.
The central bank's September Monetary Policy Report said animal protein and spices accounted for nearly half of the 200-basis-point rise in food inflation between March and August, driven by higher feed and fodder, transport, packaging and energy costs, as well as bird mortality after a heat wave. In September, meat inflation eased to 8.7% from 12.0% in August, largely due to a high base, while inflation in milk, other dairy products and eggs rose to 5.1% from 4.8%.
Animal feed, mainly corn and soybean, accounts for 60%-70% of poultry production costs, said Uday Singh Bayas, president of poultry equipment makers' body IPEMA-Poultry India. Uddhav Ahire, chairman of the Anand Agro Group, said poultry producers have yet to fully pass on higher feed costs and broiler prices could rise from January. Madan Sabnavis, chief economist at Bank of Baroda, said prolonged protein inflation could hurt lower-income households and force them to alter their diets.
Sugar output is likely to fall short of domestic consumption for a second consecutive year and may recover only in late 2028 if rains are favourable in 2027, said Rahil Shaikh, managing director of Mumbai-based trader MEIR Commodities India. Sugar prices have risen nearly 30% over the past year, prompting the government to allow duty-free imports of 1 million metric tons, with consumption exceeding 29 million tons this year against output of less than 27.5 million tons. Shaikh said global prices are higher than domestic rates, limiting the impact of imports.