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ANALYSIS: India's humdinger monsoon means it will have plenty of wheat to cover its needs


This year’s Indian monsoon is one for the record books.


According to the country’s meteorological agency, overall rainfall since the official start of the monsoon on 1 June to the end of August was 10% more than normal. The precipitation in August alone was 27% more than normal and the fourth highest for the month in more than a century - and the highest August figure in 44 years.


The drenching, with 21% higher rainfall than normal, has been concentrated in central India, including the states of Maharsahtra, Madhya Pradesh and Odisha. Some states in the northwest - such as Rajasthan and Uttar Pradesh (a big wheat producing state) - have received much less.


India gets around 70% of its annual rainfall from the monsoon - a good monsoon translates into more food (kharif or summer crops, such as rice, account for about half the country’s total food production) which in turn helps fend off inflation. It is also vital for electricity generation - hydro power amounts to about 40% of power from all sources.


Farmers have sown about 267m acres of kharif crops this year and the country’s farm minister has predicted a record 2020-21 harvest of 298.32m tonnes.


Bumper harvests for some


Bigger Indian harvests are also expected for corn, sugarcane, oilseeds, pulses and especially rice. The abundance thanks to a good monsoon makes India’s approximately 17m farmers richer and benefits the overall economy - agricultural production is the primary livelihood for about 58% of the population.


For India (and the ruling BJP) the excellent monsoon has been timely. The economy contracted by 24% during the April-June quarter (year-on-year) due to the continuing Covid-19 disruptions, and more than 100m people lost their jobs. India’s debt burden is surging and interest payments will account for more than 20% of government revenues. The country appears headed for its first recession in 40 years.


But not for some others


The world is headed towards a massive overall grains crop in 2020-21 - which the International Grains Council (IGC) now estimates will be a record 2,230m tonnes. Wheat global carryover stocks for 2020-21 are estimated by the IGC at 630m tonnes, 8m tonnes higher year-on-year.


India probably produced 107m tonnes of wheat in the July-June 2019-20 harvest, 40% higher than the average for the last 10 years; annual consumption is around 93m tonnes. Even with an extension of the free food ration to two-thirds of the population - about 800m people - of 5 kilos of rice or wheat per capita per month through November 2020, the country has ample stocks of both.


With neither China (the world’s biggest wheat producer) nor India (the second biggest) being major wheat exporters, and the world’s effective wheat supply for 2020-21 being more than 1bn tonnes, it looks like the world’s wheat supplies will be ample, and international prices will remain depressed.


Perhaps the only fly in the wheat world’s ointment right now is the rather dismal and now concluding harvests in Britain and France (the largest European producer).


Britain’s crop is down by some 35% year-on-year (to around 10.5m tonnes, making it even more dependent on imports) while that of France is about 25% lower (to about 29.5m tonnes). By the end of August soft wheat exports from the European Union and Britain in the season that started 1 July amounted to 2.47m tonnes, 47% down year-on-year.

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