Content. Monsoon Report and Sowing Update. Highlights. Southwest Monsoon: A flashback of Southwest Monsoon A slow beginning

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1 Content Highlights Southwest Monsoon: A flashback of 2011 Southwest Monsoon A slow beginning Hike in MSP of Kharif crops Sowing Progress of Kharif crops - Cereals - Pulses - Oilseeds - Cotton - Sugarcane Conclusion Vedika Narvekar - Sr. Research Analyst vedika.narveker@angelbroking.com (022) Extn Angel Commodities Broking Pvt. Ltd. Registered Office: G-1, Ackruti Trade Centre, Rd. No. 7, MIDC, Andheri (E), Mumbai Corporate Office: 6th Floor, Ackruti Star, MIDC, Andheri (E), Mumbai Tel: (022) MCX Member ID: / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID / FMC Regn No: NCDEX / TCM / CORP / 0302 Disclaimer: The information and opinions contained in the document have been compiled from sources believed to be reliable. The company does not warrant its accuracy, completeness and correctness. The document is not, and should not be construed as an offer to sell or solicitation to buy any commodities. This document may not be reproduced, distributed or published, in whole or in part, by any recipient hereof for any purpose without prior permission from Angel Commodities Broking (P) Ltd. Your feedback is appreciated on commodities@angelbroking.com

2 Monsoon Report and Sowing Update Highlights IMD projects 2012 monsoon to be normal at 96% of LPA Seasonal rainfall for the country from 1 st June to 27 th June 2012 has been 23% below normal. For week ended 27 th June 2012 rainfall has been recorded 18% below normal Total storage capacity in the water reservoirs as on is 16% of the storage capacity Sugarcane planting almost complete- acreage up 4.6% till date Pulses and Oilseeds sowing down by 34 percent and 17 percent respectively Monsoon, the backbone of the agrarian economy, has a strong hold on the country s agricultural output and consequently the vast majority of the rural population. The southwest monsoon rains, which India receives during the four months of the year (June to September), accounts for nearly 74-75% of the countries total rainfall. Thus, it has a large bearing on the crops that are totally dependent on the rainfall. Nearly, percent of the net sown area is rain fed. India gets nearly 53% of its agricultural produce from the Kharif season (June-September) and the main crop grown during this period includes Rice, Jowar, Bajra, Tur, Urad, Soybean, Groundnut, Cotton etc. Southwest Monsoon: A flashback of 2011 After a severe drought of 2009, India received bountiful rains during the last two consecutive years. In 2011 southwest monsoon season was a normal season with rainfall of above 2% (102% of LPA). The monthly rainfall over the country as a whole during all the four months of the season (June-Sept) except July, was above the LPA value. The monsoon set in over Kerala on 29 th May, three days earlier than its normal date of 1st June and covered the entire country by 9th July 2011, earlier than its normal date of 15th July. However, the withdrawal of monsoon from west Rajasthan was delayed and it commenced only on 23th September compared to its normal date of 1st September. Due to above normal monsoon in 2011, the agricultural output of Kharif food grains increased by around 6% except for Pulses, where the output declined amidst lower area under cultivation. Southwest Monsoon A slow start Indian Metrological department on 22 nd June, 2012 has predicted monsoon to be normal at 96 percent of LPA for the season June-September The department in April had predicted normal rainfall at 99 per cent of average in its First Long Range Forecast. IMD has forecast that rainfall over the country as a whole in the month of July 2012 is likely to be 98% of its LPA and that in the month of August is likely to be 96% of LPA both with a model error of ± 9 %. Rainfall for 2012 over the four broad geographical regions of the country is likely to be 93 % of LPA over North- West India, 99% of LPA over North-East India, 96% of LPA over Central India and 95% of its LPA over South Peninsula, all with a model error of ± 8 %.

3 Current Status of Southwest Monsoon 2012 In the current season, along with the delay in the onset of monsoon, the advancement has been also very slow. Further, in the month of June so far, monsoon rains are 23% below normal compared with a 10.7 percent surplus in June 1-29 last year. The cumulative seasonal rainfall in Northwest India, Central India and South Peninsula was 63%, 34% and 28% below normal respectively. While, East & Northeast India recorded near normal rains at 04 % of LPA. Storage status of reservoirs in India Central Water Commission is monitoring storage status of 84 important reservoirs spreaded all over the country. The total live storage in 84 important reservoirs in different parts of the country, monitored by CWC as on is Billion Cubic Meter (BCM) which is almost 16 per cent of the storage capacity at Full Reservoir Levels (FRL). The current year's storage is nearly 62 percent of last year's storage and 103 percent of the average of last ten years. A Hefty hike in MSP of Kharif crops Considering a substantial rise in the input cost and with intent to boost production, the Cabinet Committee on Economic Affairs (CCEA), hiked the Minimum Support Price (MSP) of Kharif crops that are sown during the months of June - August and harvested mid September onwards. A substantial hike in the MSP is seen oilseeds and Pulses as the focus is to keep in check the imports of edible oil and Pulses. Besides these, government has also focused on the cash crops like cotton where the MSP is hike by around 28% for medium staple cotton. A significant rise in the MSP would definitely provide some relief to the farmers as they would be assured of reasonable returns. However, the ultimate outcome depends on the south west monsoon which is considered as the backbone of the Indian agriculture. Even if farmers opt for a particular crop considering the higher returns, monsoon advancement and the rainfall distribution would have a significant impact on the output. Sowing progress of Kharif crops Rice Rice is the main Kharif sown crop in India and holds a major chunk of about 68% of the total food grain produced in the Kharif season. West Bengal contributes about 18-20% share in the total Rice production in India, whereas Bihar, Assam and other Northeastern states contributes more than 10% share in total Rice production in India. Although, monsoon has recovered in the north eastern part of India in the last week, the overall sowing remain lower.

4 Area under Rice cultivation as on 28 th June, 2012 stood at around 30.7 lakh hectares (ha) as against 41.5 lakh ha a year ago period. Compared to last year, less sowing is reported in almost all the states due to delayed monsoon. However, nursery preparation under irrigated condition is in progress. Out of the total area under rice, Punjab has planted Rice under 14.1 lakh ha so far in the current season. With the forecast of near normal monsoon in the major rice growing areas we expect planting to gain momentum in the coming weeks Pulses Maharashtra, Karnataka, Andhra Pradesh, Madhya Pradesh and Uttar Pradesh are the main Kharif pulses producing states. According to IMD, monsoons in central and Southern parts of the country (Kharif Pulses producing regions) are expected to be 96% and 95% of the LPA respectively. However, monsoon in these regions have been 34% and 28% below normal so far and this has affected sowing of Pulses to a large extent. Area sown under Pulses this year is 34% lower at 3.99 lakh hectares compared to 6.08 lakh ha during the same period last year. According to Andra Pradesh Farm department, area under Pulses is down by 48.7%. Going by the area under Pulses cultivation till now and the monsoon progress as of today we expect area under Pulses to remain stable or may even decline if monsoon fails to recover in the month of July. Oilseeds Major Kharif oilseed producing regions are Madhya Pradesh (Soybean), Gujarat (Groundnut) and Andhra Pradesh. Soybean is the largest produced oilseed in India and the area under this protein crop is expected to increase this season as farmers may shift to this crop on account of higher returns earned in season. The sowing which was lagging behind due to below normal rains has recovered with advancement of monsoon in Maharashtra. As on 28 th June total oilseeds sowing is down by 17% while area under soybean increased by 37% to 6.3 lakh hectares. Oilseeds planting would improve further once monsoon fully grips the Western, Central and Northern parts of India. Cotton Cotton, one of the most important cash crops of India may witness drop in acreage in the coming season as farmers may shift to more lucrative crops like Soybean in Maharashtra and Guar in Rajasthan. North India, Cotton sowing is completed in the irrigated areas. However, in other parts it commences with the onset of monsoon. Area under Cotton cultivation is up 7% as on 28 th June, 2012 at 3.14 mln ha compared with 2.92 mln ha a year ago. In Sugarcane Sugarcane planting is almost completed across India with acreage higher so far by around 4.6% at 52.2 lakh hectares. The cane crop is in the growing phase and thus southwest monsoon is very crucial to maintain yield of the crop. Expectations of below normal rains might affect sugarcane and thereby sugar output in and this has led to the upside in sugar prices in the last 2-3 weeks.

5 Spices Turmeric and red chilli sowing in the southern regions of the country, the hub of spices, starts with the onset of monsoons. However, this year sowing of Chilli in Guntur and adjoining areas have commenced on slow pace and is likely to gather pace only by the mid of July on account of inadequate rainfall. With respect to Turmeric, sowing is expected to decline this year as farmers may shift to other remunerative crops. AP contributes 50% in the total Turmeric output in India. Normal acreage under turmeric in A.P. is around hectares. However, till now only 7000 hectares area has been covered so far. Conclusion As far as the monsoon is concerned, the current predictions of South west monsoon rainfall at 96% of LPA do not point towards a major downfall in the production of Kharif crops. However, in addition to the overall monsoon rainfall, the even and timely distribution across regions and its withdrawal also plays crucial role in the determining the output of any agricultural commodity. In the past few weeks, we have noticed that the prices of almost all the Kharif agri commodities have witnessed a rise. However, the extent of the gains varied depending on the existing fundamentals of the commodity. It is very early to predict the impact of below normal rains on sowing and yield of Kharif crops because if the monsoon recovers in the month of July as predicted by IMD, then it may boost the sowing which was lagging behind in the month of June. Thus, the monsoon progress has to be watched closely in the coming days to get a clearer picture of the crop prospects for this season.

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