Full story
Maize and Cotton Markets See Unprecedented Gains
Prices of maize in India have surged by 30 to 40 percent over the past four to five weeks, driven by a domestic crop shortfall. Sumit Sureka, chairman of the Central Large Farmers' Association (CLFMA) of India, stated that he has never witnessed such high maize prices during his 30-year career. The increase has been described as unprecedented and at historic highs.
Feedmakers in West Bengal are currently procuring maize at rates between Rs 31,000 and Rs 32,000 per tonne. Sureka attributed the price jump directly to the shortfall in domestic supply, noting that the surge is not driven by speculation but by fundamental supply constraints.
Urad Production Faces Sharp Decline
The impact of climate variability extends beyond maize, with significant reductions projected for other kharif commodities. B Krishnamurthy, managing director of Four P International Pvt Ltd, reported that crop yields have suffered due to these climate impacts. Specifically, he noted that expected urad (black matpe) production was initially estimated at 15 lakh tonnes but has now been revised downward to a projected 8-9 lakh tonnes.
Krishnamurthy identified untimely rain in Uttar Pradesh, Madhya Pradesh, and Rajasthan as the primary cause for this decline. On the international front, he noted that urad crops in Myanmar were also affected by similar weather patterns. However, he added that Brazil has helped meet the resulting demand, with prices rising steadily without the influence of speculative trading.
Market Prices Diverge from MSP
While maize and urad see volatility, the broader kharif market presents a mixed picture regarding the Minimum Support Price (MSP). The Hindu Business Line reported that prices of most Indian kharif crops are ruling above the MSP due to fears that production could be lower because of drought and untimely rain. Agriculture sector stakeholders have reported record prices for commodities such as rice and maize.
However, exceptions exist within specific varieties. Rampal Jat, President of Kisan Mahapanchayat in Jaipur, reported that while all-India market prices are generally above MSP, the best variety of moong (green gram) is trading at ₹7,800 per quintal—₹980 below MSP. Similarly, the best variety of bajra (pearl millet) is below MSP at ₹2,700 per quintal.
Former agriculture secretary Siraj Hussain stated that mandi prices are slightly higher than MSP for various crops due to lower production caused by El Nino. He expects urad and tur (pigeon pea) prices to remain elevated despite the zero import duty on these grains. Conversely, he noted that paddy prices may fall as arrivals peak, while cotton prices may fall below MSP due to the government allowing imports at zero duty until the end of December.
Economic Implications and Policy Concerns
The divergence between market rates and MSP has drawn attention from economists and policy analysts. D K Pant, Chief Economist and Head of Public Finance at India Ratings & Research, stated that prices higher than MSP provide farmers with additional income compared to government-set rates. Trade policy analyst S Chandrasekaran concurred, stating that higher prices in some pockets will provide rural growth and accelerate the economic engine.
Chandrasekaran described current agricultural produce marketing committee (APMC) yard prices as a natural hedge against climate impacts on yield. He urged the Centre to consider farmers’ losses before making inflation-related policy decisions, highlighting the delicate balance between supporting farmer income and managing consumer inflation.
Global Factors and Future Outlook
Geopolitical tensions are also influencing domestic pricing structures. Delhi-based exporter Rajesh Jain Paharia stated that geopolitical issues are affecting imports by pushing up freight costs, contributing to prices ruling above MSP. He further noted that prices of rabi crops, including gram (chana) and wheat, are also ruling above MSP.
In the cotton sector, Ramanuj Das Boob, a sourcing agent in Raichur, said cotton yields are low this year, leading farmers and traders to hold back produce in anticipation of higher prices. Das Boob stated that prevailing domestic cotton prices are similar to global prices from origins like Brazil, supported by a steady trend in global prices.
The Ministry of Agriculture is currently assessing kharif crop production, accounting for El Niño-induced drought and recent cyclones in the South. As weather patterns continue to disrupt yields, stakeholders remain vigilant about how these production drops will influence future market stability and policy responses.
