New Delhi: India`s summer-sown crop output is set to shrink by more than initial forecasts after its worst monsoon rains in 37 years, raising the spectre of higher food prices and its further dependence on imports of rice and sugar.
Output of rice planted in the monsoon months from June could record a bigger-than-expected fall of 18 percent on year, while cane output was likely to drop by 9 percent, the government`s first estimates of the summer-sown crop showed on Tuesday.
The government issues four estimates of harvests as it gathers more data.
"Output projections will have impact on prices. It will support the price uptrend and our import dependence will go up," said Veeresh Hiremath, a senior analyst with Karvy Comtrade, a commodity brokerage based in the southern city of Hyderabad.
Lower cane availability led to more than 40 percent drop in sugar output to about 15 million tonnes in the year to September, forcing the country to permit tax-free imports of raws and whites.
Large imports by India, the world`s top consumer and biggest producer after Brazil, has helped New York sugar futures surge to the highest in nearly three decades, while Indian spot prices rose 5 percent on Tuesday to a record Rs 3,353 (USD 70.9) per 100 kg.
Food prices would definitely go up after these estimates, said S Raghuraman, head of research, Agriwatch, a commodity research firm.
Anil Singh, secretary of the National Alliance of Farmers` Associations, said lower cane output would further increase imports of sugar.
Traders and analysts say Indian mills have so far contracted to import about 500,000 tonnes of raws and 300,000 tonnes of whites since early this year when import duty was abolished.
The government expects rice output to fall about 15 million tonnes, or about 18 percent on year, highlighting a shortage which prompted Indian state agencies to float tenders to import 30,000 tonnes.
A senior government official said output estimates might be revised upward as many states were still harvesting summer-planted crops.
"Drought has hit the food grain output but this is only the first estimate. A clear picture would emerge by February," said NB Singh, farm commissioner.
India initially estimated a fall of about 10 million tonnes in rice output, but last week, the US Department of Agriculture forecast a 15-17 million tonnes decline from last year`s record output of 99.2 million tonnes.