Global Economy

Companies keeping close watch on global rainfall trends

Companies have stepped up monitoring of the progress of monsoons globally, amid extreme volatility in the prices of agriculture commodities over the past six-seven months.

Two key reasons for high volatility are changing climatic conditions and increased geopolitical risk, according to industry executives. While extreme weather conditions have hurt agriculture production and forced several countries to put curbs on exports, the building tension over the China-Taiwan conflict threatens to worsen a supply chain already disrupted by the Russia-Ukraine war.

“This year has been particularly volatile,” said Angshu Mallick, MD, Adani Wilmar that sells edible oils, rice and pulses under Fortune brand. “Our global partner, Wilmar, is keeping a very close watch on monsoon trends because it will directly impact how prices move in India.”

The forecast of a hot and dry August in the US is putting the soybean crop in jeopardy, trade watchers said. Soybeans have the most potential to lose yield from August and early September, because the pod setting and filling occur in August and needs recurring rainfall at that time.

A shortage in the supply of soybean oil could not only cause an increase in its prices, but also make other edible oils costlier. Prices, though, have cooled from their peaks, as Indonesia and Malaysia have eased curbs on the shipment of palm oil, one of the main cooking mediums in India.

Gemini Edibles & Fats managing director Pradeep Chowdhry said: “Closely monitoring global monsoons has become extremely important post the Russia-Ukraine war, which has severely impacted the global supply chain. We do it regularly but now it has become more critical.”

According to Suraj Agarwal, managing director of agri-consumer products company RiceVilla, droughts in Italy and Jordan had made Indian rice prices dearer as these two countries started buying heavily from India.

Companies, in India and abroad, are also monitoring the Indian monsoon. This year till July 29, the area covered under paddy, the primary crop during the kharif season, was 13.3% less from the year-ago period, as farmers in the major producer states of Uttar Pradesh, Bihar, Jharkhand and West Bengal slowed sowing due to poor rains. Odisha and Chhattisgarh too have witnessed lower sowing. At an average yield of 2.6 tonnes per hectare, the lower acreage has put close to 10 MT at stake.

Any decline in rice production would further complicate the availability of food grains at affordable prices. It could also hurt supplies and raise prices globally as India is currently the largest exporter, accounting for about 40% of its global trade.

Excess rainfall is also a threat, as it could cause floods and damage agri crops.


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