It is not only the threat of the US to impose reciprocal tariffs from 2nd April 2025 which must be engaging policy makers in the Government. The size of rabi crop of wheat, ready to hit the market in three weeks, is equally important for economic decisions.
Higher than normal temperature in February in wheat growing regions of north India was a repeat of 2022 when the wheat crop was damaged, and both the production and government procurement were lower. Many reports in the media expressed a fear that we may again have a lower crop due to shriveling of the grain.
Higher sown area under wheat and pulses
The wheat prices have remained rather high through the year, so the farmers preferred wheat over other crops. Sown area under wheat is about 6 lakh hectares higher than last year. Area under gram is also a little higher.
In Madhya Pradesh, the State Government has announced a bonus of Rs 175 per quintal over and above the MSP of Rs 2425 per quintal of wheat. Rajasthan has also announced a bonus of Rs 125 per quintal.
Punjab, Haryana and UP have not announced any bonus on wheat.
Last year, mustard farmers did not realize minimum selling price (MSP), so the area under mustard is lower at 97.47 lakh hectares, down from 99.23 lakh hectares last year.
Despite healthy agriculture growth as shown in October-December quarter, market prices were lower than the MSP for several kharif crops. Even though rural spending seems to be improving faster than urban spending, low prices of most kharif crops harvested in October to December 2024 would have adversely impacted the income of farmers.
Warmer winter may not have affected wheat crop
Despite warmer winter in January and February 2025, the general assessment is that wheat, chana and mustard production may not be much affected as the temperature has been a little cooler in March, due to snowfall in Jammu and Kashmir.
In a presentation made by Agriwatch at the Future of Milling Conference hosted by the Roller Flour Mill Federation of India at Goa on 3rd and 4th March 2025, it was projected that there is no adverse impact on crops due to warmer February. In fact, their estimate of wheat production is 8.2 percent higher than last year.
But, there is genuine fear that a much warmer March may adversely impact wheat production. However, there is no confirmation of this from ICAR’s Indian Institute of Wheat and Barley Research, Karnal.
But, a good signal of the crop size could be the market price of wheat. The price in Uttar Pradesh and Delhi is in the range of Rs 2,900-3,000 per quintal. Over the next three weeks, the Government would like the prices to fall to the level of MSP, Rs 2425 per quintal, so that it can procure about 30 million tonnes of wheat.
Limits of technology in assessment of crop size
Despite all the claims of using drones, satellites, artificial intelligence and machine learning, estimating the size of a crop is not easy.
To illustrate, no other crop is as closely monitored as sugar cane. Every sugar mill is closely connected to the farmers as it has to procure sugar cane for operating the mill. Sugar mills use their own resources to conduct field surveys in their area of operation. Even then, they find it difficult to make a correct assessment.
For 2024-25 season, the Indian Sugar and Bio-Energy Manufacturers Association (ISMA) issued a preliminary estimate in July 2024 and projected sugar production of 33.3 million tonnes (before diversion), lower than 34.1 million tonnes in 2023-24 (October to September).
On November 6, 2024, ISMA released its first estimate for 2024-25 season (October-September). It retained the preliminary estimate of production of 33.3 mt of sugar.
Another stake holder in sugar sector is the All-India Sugar Trade Association. In January 2025, it projected sugar production at 30.52 million tonnes.
On February 1, 2025, in its second advance estimate, ISMA projected a lower estimate of sugar production at 31.02 million tonnes. The explanation given by ISMA is that there was widespread red rot infestation and varietal replacement in Uttar Pradesh due to which sugarcane crop was adversely impacted. It is the very nature of agricultural crops which makes this assessment difficult.
Looking ahead
After suffering low prices of their kharif produce, the farmers would be looking for remunerative prices of rabi crops.
The MSP of mustard is Rs 5,950 per quintals. In the mandis of Rajasthan, the early arrivals of mustard are quoting at Rs 5,600 per quintal (as is where is basis). Even mustard having 42 percent oil is trading at Rs 5,600 per quintal. Despite higher import duties on edible oils, the prices of soybean and mustard have not risen beyond the MSP.
However, at the moment, the highest concern of farmers would be negotiations on agriculture tariffs with the US as cheaper imports would be the biggest threat to their livelihood.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
