India to reap bumper grains, sugar crop after normal monsoon

By Ratnajyoti Dutta and Mayank Bhardwaj

NEW DELHI (Reuters) - India's monsoon rains are tapering off at the end of a normal four-month season, leaving behind farms full of rice, cane and cotton that could help the country curb high food prices and leave plenty of grain and sugar for exports in 2011/12.

India, the world's second-biggest rice, cotton and sugar producer, is on track to cultivate a record 245 million tonnes of grains in the current crop year to June, up 1.4 percent from a year ago. The bumper crop will help reduce price volatility and bring relief to several Asian importers who are trying to combat food-led inflation.

After a fitful start, the rains picked up in the middle phase, watering vast stretches of the country that remain devoid of irrigation facilities despite the fact that about half of India's 1.2 billion people depend on agriculture.

There were some concerns about heavy, late showers in western India's cotton and cane growing areas, but those fears were banished by a dry spell that is poised to improve recovery rate from the cane crop.

A threat to rice from flooding has also ebbed.

"Rains have been fantastic, to an extent that they will help winter crops as well. We are still holding to our output target for the 2011/12 crop year," said Gurbachan Singh, farm commissioner, a top government official.

Rains were 33 percent below average in the week to Sept. 28, the weather office said on Thursday.

They have been two percent above average since the start of the June-September season, in line with the official forecast of a normal monsoon in 2011.

"Monsoon is expected to completely withdraw from the central parts (of the country) this week," said a weather official, who declined to be named as he is not authorised to talk to the media.

CONCERNS SHORT-LIVED

Floods and heavy rains in some parts of Maharashtra and Uttar Pradesh caused some anxiety, but the water receded quickly in the top two sugar producing states.

Heavy rains in some parts of the rice-growing states of Orissa, Bihar and West Bengal led to initial fears of lower output, but officials said overall production targets will be met. Fears of soybean yields being hit have also eased.

"Yes, there were concerns about soybean yields due to late rainfall. But they were short-lived. Yields are good," said Atul Chaturvedi, chief executive officer of farm business Adani Wilmar.

Only production of guar seed, used to make guar gum which is used as a controlling agent in oil drilling, could be hit because of the delayed arrival of the monsoon. The United States and Europe are the biggest importers of guar seed.

Overall higher farm output will keep a lid on food prices in Asia's third largest economy, staving off imports and encouraging exports of sugar and grains.

India has allowed 2 million tonnes of rice exports this year, undercutting supplies from top producer Thailand. It also allowed for the export of 2 million tonnes of wheat.

Global food prices remained high in August, buoyed by a worrying outlook of low grain supplies and stocks. High prices gave little respite to policy makers, already battling stubborn inflation and faltering economic growth.

Last year's normal monsoon, which came after the worst drought in nearly four decades, helped India become a sugar exporter and saw the benchmark London white sugar futures ease by a fifth since January.

(Additional reporting by Rajendra Jadhav, Deepak Sharma, Meenakshi Sharma; Writing by Krittivas Mukherjee, editing by Miral Fahmy)