July 16, 2012 / 9:18 AM / 5 years ago

RPT-UPDATE 2-Below-average monsoon may reduce India's rice crop

(Repeats story to replace Update 1)

* Monsoon rainfall turned positive in past week

* Seasonal rains 22 percent below average so far

* Free export policy on key farm items to continue

By Mayank Bhardwaj

NEW DELHI, July 16 (Reuters) - Below-average monsoon rains may reduce India’s rice output this year as well as cut growth in the farm sector to below the government’s target of 4 percent, Farm Minister Sharad Pawar said on Monday.

Pawar said the government had huge stockpiles of grains and was ready with contingency plans to meet any eventuality.

“We have not come to a level where we can apprehend a drought. We will wait up to the second week of August,” he said, responding to a query on whether the government could curb exports in farm commodities against the backdrop of poor rains so far in the four-month long monsoon season.

Traders said the huge stocks would ensure adequate supplies in the domestic market.

“Our huge stocks will act as a cushion against any price rise in case there is any supply shortfall,” said Vijay Setia, former president of the Rice Exporters’ Association of India.

By July 1, government rice stocks amounted to 30.7 million tonnes, much higher than the 9.8 million targeted for the quarter to end-September. Wheat stocks were 49.8 million tonnes against the quarterly target of 17.1 million.

India is the world’s second-biggest producer of rice and wheat. The slow progress of the monsoon, which is so far 22 percent below average, has raised concerns about summer planted crops such as rice, cane and cotton.

Rice, the main food crop of the world’s second most populous country, accounts for about 70 percent of total grain output in the summer season.

More than half of India’s arable land is rain-fed, and the farm sector contributes around 15 percent to Asia’s third-largest economy.

Pawar said it was too early to say whether the government would scrap a policy of unrestricted exports of rice, wheat, sugar and cotton, which it adopted last year.

“At least two occasions in the seven and eight years, I have observed that the monsoon rains have picked up after July 15,” he said.

The monsoon rains have been below average since the start of the season in June, but they improved in the past week for the first time in the current season.

“It is a challenge for farmers to meet the same performance as in the last two years,” Pawar told reporters. “This year, the monsoon is playing hide-and-seek.”

India enjoyed bumper harvests in rice and other grains over the past two years. It also recorded higher cane output in the last season.

India is the world’s largest sugar consumer and the second-largest producer, and the progress of the monsoon is a crucial factor in determining physical and futures prices. (Editing by Miral Fahmy and Jane Baird)

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