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India's Early Monsoon Boosts Crop Hopes

SPECIAL PDF REPORT JUNE 2011

• India monsoon 16 pct above normal in past week • India's monsoon on track as weekly rains rise • India struggles to perfect art of monsoon forecasting • Food rights bill holds key to India farm exports plan • India normal monsoon forecast to boost farm sector

A couple rests on a seaside promenade during a rain shower in the southern Indian city of Kochi May 29, 2011. India's annual monsoon rains have hit the southern state of Kerala two days earlier than expected, weather officials said, boosting prospects for a harvest that could spur Asia's third-largest economy. REUTERS/Sivaram V.

http://www.reuters.com/

India monsoon 16 pct above normal in past week NEW DELHI, June 9 (Reuters) -

I ndia's monsoon rains were 16 percent above normal in the week to June 8, the weather office said on Thursday, sug-gesting the rainy season is progressing as expected, which

will aid planting of summer crops like rice, oilseeds, cane and cotton.

The data from the India Meteorological Department is avail-able in a map form on its website:

( http://www.imd.gov.in/section/hydro/dynamic/weelly-rainfall.htm )

In the previous week, rains were 12 percent above average with particularly heavy downpour in tea, rubber and coffee areas of southern India, and rice and cotton growing areas in the west.

Last year, which saw a normal monsoon, rainfall was normal in the week ending June 9.

The monsoon, vital for farm output in India's trillion-dollar economy, hit the country's southern coast on May 29 this year, three days ahead of schedule.

At this early stage, crops are not greatly affected even if rains are above average.

Monsoon to reach India's rice areas this week-end By Ratnajyoti Dutta

NEW DELHI, June 8 (Reuters) -

M onsoon rains are expected to arrive over India's main rice growing areas this weekend, which could help erase an initial delay in planting of the main

summer food crop, weather office sources said on Wednes-day.

Monsoon normally spreads to the rice belt of West Bengal and Orissa states in the east by the first week of June, but this year it had paused for about three days.

The two eastern states share one fifth of rice output of India, the world's second top producer of the grain.

"Good rains are expected over rice areas in eastern region over next two to three days," said a weather office source.

"Rice planting will pick up once rain spreads to growing belt of eastern India," said L.S. Rathore, head of the agromet division of the India Meteorological Department.

India produced 94 million tonnes rice in 2010/11 crop year to June, up 5.6 percent from the previous year.

India's vital monsoon has covered tea, coffee, rubber, cane, corn, cotton areas of south India and parts of western region, after arriving over the southern Kerala coast, three days ahead of schedule on May 29.

(Continued on page 3)

INDIA'S EARLY MONSOON BOOSTS CROP HOPES JUNE 2011

TOP NEWS

A tourist boards a boat as rain clouds approach over the river Ganges in Kolkata May 29, 2011. India's annual monsoon rains are expected to arrive on its southern coast around May 31, on schedule, despite expectations of its delayed onset over the Andaman, the India Meteorological Department reported. REUTERS/Rupak De Chowdhuri

"A week long delay would have been a concern for the rice planting, but not this pause in the monsoon progress on the eastern parts," he said.

Rains were 20 percent below normal over the eastern India for the first week of the four-month long rain season, the weather office's rainfall data showed.

But the rains were 20 percent above normal during June 1-7 with most parts of the south India receiving heavy showers.

India's weather office had predicted a normal monsoon for second straight year in 2011, after the driest season in 2009.

A normal monsoon leading to higher farm output is vital for taming a high food inflation that the third-biggest economy in Asia has been battling since last year.

Monsoon progress hits Indian agri commods MUMBAI, June 6 (Reuters) -

P rices of summer-sown Indian crops fell on Monday due to quicker advancement of monsoon rains in the coun-try, raising hopes of better crop, analysts said.

Monsoon rains have covered half of Maharashtra state five days ahead of schedule, data with the weather department showed.

OILSEEDS AND SOYOIL

India's oilseeds and soyoil futures fell on Monday taking cues from weak Malaysian palm oil and early arrivals of monsoon rains in the Maharashtra state, which raised hopes of a good soybean harvest in 2011/12, analysts said.

* The most-active July soyoil on India's National Commodity and Derivatives Exchange (NCDEX) closed down 0.85 percent at 655.85 rupees per 10 kg.

* The most-traded July soybean on NCDEX finished 0.79 per-cent lower at 2,392.5 rupees per 100 kg, while July rapeseed dropped 0.88 percent to 2,945 rupees per 100 kg.

* In the Indore spot market, soyoil dropped 3.25 rupees to 651.4 rupees per 10 kg, while soybean eased 7 rupees to 2,342 rupees per 100 kg. At Sri Ganganagar in Rajasthan, rapeseed ended flat at 2,880 rupees per 100 kg.

SPICES

India's jeera futures closed lower due to higher supplies in spot and subdued demand from local and overseas buyers.

* The most-traded June jeera ended 1.89 percent down at 13,901 rupees per 100 kg on the NCDEX.

* Arrivals in Unjha on Monday were around 10,000 bags of 55 kg each against 4,000-5,000 bags last year during the same period.

* In Unjha, jeera fell 25 rupees to close at 14,465 rupees per 100 kg.

TURMERIC

India's turmeric futures hit a contract low due to early arrival of monsoon rains in the Maharashtra state and also weak spot demand.

* Andhra Pradesh, Karnataka and Tamil Nadu in the south and the western state of Maharashtra are major turmeric pro-ducers.

* The most traded June turmeric on NCDEX closed 1.56 per-cent down at 7,294 rupees per 100 kg. It hit a contract low of 7,268 rupees per 100 kg.

* In Nizamabad, turmeric ended at 7,373 rupees per 100 kg, down 132 rupees.

PEPPER

India's pepper futures closed higher as lower spot supplies and diminishing stocks prompted buying.

* The most-traded June pepper on NCDEX closed at 29,561 rupees per 100 kg, up 1.27 percent.

* At the Kochi spot market in Kerala, pepper gained 340 rupees to end at 28,600 rupees per 100 kg.

GUAR AND CHANA

India's guar seed futures closed lower as quicker advance-ment of monsoon raised hopes of better sowing.

* The most traded guar for June delivery on NCDEX closed at 3,241 rupees per 100 kg, down 2.29 percent.

* At Jodhpur, a key market in Rajasthan, guar seed dropped 75 rupees to end at 3,254 rupees per 100 kg.

* India's guar seed acreage is expected to rise 15-20 percent in the upcoming kharif season as normal monsoon rains are seen helping farmers in expanding area after prices jumped to a record high in the current season, industry officials said.

CHANA

India's chana futures closed mariginally up on demand from local millers though profit booking at higher levels capped the gain.

* The most active chana for June delivery closed nearly flat at 2,538 rupees per 100 kg.

* In Delhi, a key spot market, chana fell 16 rupees to 2,450 rupees per 100 kg.

COTTON

* The most traded Shankar-6 variety of cotton fell 500 ru-pees to 44,000 rupees per candy of 356 kg each, data from Cotton Association of India showed.

India oilseeds, soyoil fall on monsoon rain progress MUMBAI, June 6 (Reuters) -

I ndia's oilseeds and soyoil futures fell on Monday after-noon on cue from weak Malaysian palm oil and early arri-vals of monsoon rains in the Maharashtra state, which

raised hopes of the good soybean harvest in 2011/12, ana-lysts said.

* The most-active July soyoil on India's National Commodity and Derivatives Exchange (NCDEX) was down 0.33 percent to 659.3 rupees per 10 kg at 1:46 p.m.

* The most-traded July soybean on NCDEX fell 0.44 percent to 2,401 rupees per 100 kg, while July rapeseed dropped 0.64 percent to 2,952 rupees per 100 kg.

* At 1:47 p.m., Malaysian palm oil futures were down 0.47 percent at 3,405 ringgit per tonne, while U.S. soybean was up 0.07 percent at $14-15-1/2 per bushel.


INDIA AWAITS KEY MONSOON RAINS MAY 2011 INDIA AWAITS KEY MONSOON RAINS JUNE 2011 INDIA'S EARLY MONSOON BOOSTS CROP HOPES JUNE 2011

* In the Indore spot market, soyoil dropped by 1.25 rupees to 653.4 rupees per 10 kg, while soybean eased by 4 rupees to 2,345 rupees per 100 kg. At Sri Ganganagar in Rajasthan, rapeseed fell 39 rupees to 2,841 rupees per 100 kg.

* "Rainfall is very beneficial for soybean sowing. It is putting pressure on prices, though in the U.S., excessive rains have delayed sowing," said Chowda Reddy, analyst with JRG Wealth Management.

* Monsoon rains have covered half of the Maharashtra state, the second biggest soybean producer in the country, five days ahead of schedule, weather department data showed.

India's monsoon on track as weekly rains rise By Ratnajyoti Dutta

NEW DELHI, June 2 (Reuters) -

I ndia's monsoon rains were 12 percent above normal in the week to June 1, the weather office said on Thursday, after hitting the southern coast two days ahead of expectations,

with coffee and rubber crops potentially benefiting.

Weather department sources said they were still expecting normal progress for the monsoon.

Last year, the monsoon hit the southern coast in Kerala a day ahead of the normal date of June 1, but a cyclone in the Ara-bian Sea stalled initial progress.

"Conditions favour the monsoon progress and nothing un-usual has been recorded so far which can stall normal pro-gress," a source at the India Meteorological Department said.

The monsoon, vital for farm output in India's trillion-dollar economy, hit the country's southern coast on May 29 this year.

" Higher rainfall at this stage in southern parts will help crops like coffee and rubber," said S. Raghuraman, an ana-lyst with consulting firm Agriwatch.

He said the higher rainfall would also help in planting of water-absorbing paddy crop in south India. The monsoon normally delivers higher rainfall in its early stages over the south of the country.

It provides irrigation for 60 percent of India's arable land and can give rural incomes a boost through increased crop pro-duction. About half of India's farm output comes from crops sown during the four-month-long season. Rains should reach remaining parts of Kerala, Tamil Nadu and Karnataka by Friday, the weather office said.

The south-west monsoon usually covers half of the country by the middle of June and the entire country by mid-July.

"We expect the entire south of India will be covered by the first week of June," said another source at the weather office.

Key crops sown in the summer include rice, sugar cane, soy-bean, corn and cotton.

The early arrival of the monsoon has weighed on sentiment in India's oilseeds and soyoil futures markets which are ex-pecting higher production, and depressed gold demand as players expected farmers to spend on seeds and fertilizers instead of jewellery.


INDIA AWAITS KEY MONSOON RAINS MAY 2011

A cycle rickshaw puller transports used rubber tyres under a sky of monsoon clouds in Agartala, capital of India's northeastern state of Tripura May 24, 2011. REUTERS/Jayanta Dey

INDIA AWAITS KEY MONSOON RAINS JUNE 2011 INDIA'S EARLY MONSOON BOOSTS CROP HOPES JUNE 2011

"Futures lost early gains this week due to hopes of higher farm output arising from the expectation of a normal mon-soon," said Vinita Advani, analyst with Geojit Comtrade.

The monsoon hit a week earlier than normal in 2009 but the season turned out to be the driest in four decades, causing widespread losses to crops, hitting farmers' income and push-ing up food inflation.

Last year's normal rains helped boost production of grains and oilseeds to record highs and could persuade the govern-ment, concerned to ensure its half a billion poor have enough to eat, to ease its ban on grain exports.

India's monsoon rains hit mainland two days early By Ratnajyoti Dutta

NEW DELHI, May 29 (Reuters) -

I ndia's annual monsoon rains have hit the southern state of Kerala two days earlier than expected, weather officials said on Sunday, boosting prospects for a harvest that could

spur Asia's third-largest economy.

The July-September monsoon irrigates 60 percent of India's farms and good rains will brighten hopes for a bumper har-vest that should ease high food prices and boost the purchas-ing power of the 600 million Indians dependent on agricul-ture.

Higher farm supplies could also encourage the government to allow wheat and rice exports, restricted since 2007 to boost domestic supplies to fight high food prices. "It's been raining over the Kerala coast and over the Andaman sea," a senior official of the Indian Meteorological Department (IMD) told

Reuters, declining to be named as he is not authorised to speak to the media.

The monsoon generally hits the mainland around June 1 and covers the rest of India by mid-July. The weather office pre-dicted earlier it would arrive in Kerala on May 31.

They have forecast a normal monsoon this year, which would give India rainfall of between 96-104 percent of the 50-year average of 89 cm (35 inches) during the four-month period.

Predictions have often been proved wrong in the past, most recently two years ago when the IMD failed to predict the worst drought in nearly four decades. But if the forecast is right, 2011 will see the second straight year of normal rains.

India struggles to perfect art of monsoon fore-casting By Krittivas Mukherjee and Ratnajyoti Dutta

NEW DELHI, May 17 (Reuters) -

T echnological wizardry may have improved forecasting of the crucial monsoon rains in India, but success still remains, at best, patchy, making it tough for farmers

to plan crops and meet demand in the trillion-dollar econ-omy.

This year, the country has forecast a normal monsoon. In theory, that should mean higher farm output, which could tame food prices and help persuade the government to ease curbs on rice and wheat exports, benefiting other Asian economies that are struggling with food shortages.



A man covers himself with a shawl to avoid rain as he walks on a beach in the southern Indian city of Kochi May 29, 2011REUTERS/Sivaram V.


In reality, since 1994, India's weather office has only managed to forecast the June-September monsoon outcome correctly five times, discounting an error band of +/-5 percent, while on seven occasions the extent of error touched double digit, Deutsche Bank analysts said in a research report.

From the world's top producer and consumer of a range of commodities like sugar and grains, such uncertainties have huge implications for global commodities markets.

For about 600 million Indians who are dependent on farming, there is a direct correlation between ample rains and their disposable incomes, explaining the host of superstitions that survive around bringing rains, such as women ploughing fields naked and frog "marriages".

"Current capabilities to forecast monsoon are not sufficient," Shailesh Nayak, the top civil servant in the ministry of earth sciences which controls the country's weather office, told Reuters. "We need to augment our capabilities to forecast monsoon more accurately."

Back in 1886, when the India Meteorological Department made its first monsoon forecast, the pace of melting of snow on the Himalayas was used to predict the timing and quantity of rains.

Now, Indian officials use complicated statistical models aided by super computers and satellite data to predict weather pat-terns. But as recently as 2009 the weather office got its mon-soon forecast completely wrong.

"Using a statistical approach is a good guide to a seasonal outlook, but this approach tends to limit any statistical anom-aly of the past by minimising the possibility that it could hap-pen again," said Michael Ferrari, vice president, Weather Trends International.

So do India's forecasting methods lag those in the western world? To say yes would only be partially true.

Among all the major global economies, India's dependence on seasonal rains is unparalleled. It is also the only country to quantify the amount of rains expected -- aimed at allowing farmers to plan crops better but making it more susceptible to errors.

"A correct forecast of rainfall quantum over a particular area is still a challenge," said Nayak.

Forecasts also have political implications given the farm sec-tor's importance to people in rural areas, who make up 70 percent of India's 1.2 billion people. It is the single largest fac-tor influencing politics, even though it only makes up 14.6 percent of the economy.

A normal monsoon brings a boost to farm incomes and so to demand -- for cars, motorcycles, consumer goods and even gold, which is used for investment.

Scant rainfall brings pressure on the government, as farmers demand higher prices and ask to waive loan repayments and electricity charges, impacting public finances.

A failed monsoon can also send shockwaves into international markets. In 2009, the country suffered its worst drought since 1972 after initial forecasts had been for normal rains. India had to import sugar, driving global prices to their highest in

three decades.

"The sensitivity around the Indian monsoon has financial repercussions both within India and abroad. Particularly with respect to sugar, which has become a much more important global commodity in light of higher oil and (corn derived) ethanol prices," Ferrari said.

NAKED PLOUGHING, FROG WEDDINGS

But for many of India's farmers, the monsoon is still about studying wind direction and observing cloud patterns, with a dose of superstition thrown in.

In eastern India, it is not unknown for farmers to ask their unmarried daughters to plough parched fields naked to em-barrass the weather gods into bringing rains.

Elsewhere, customs such as marrying off two frogs and holding community feasts are followed in the hope of rains.

According to Indian weather officials, improving forecasting methods is a work in constant progress.

"We have to bring in uncertainties of monsoon forecast to forefront to better understand complexities involved with the business of weather prediction," said Ajit Tyagi, India's weather office chief.


Women walk on a foot bridge as it rains in Srinagar April 19, 2011. REUTERS/Fayaz Kabli


India's 2011 monsoon rains arrival seen on time NEW DELHI, May 13 (Reuters)

M onsoon is likely to enter India through the southern Kerala coast on May 31, the weather office said on Friday, marking the start of the four-month rainy

season that is forecast to be normal this year, possibly boost-ing the farm sector.

"The date of onset of south-west monsoon over Kerala is likely to be on May 31, with a model error of plus, minus of four days," state-run India Meteorological Department (IMD) said in a statement.

Monsoon starts over Kerala and covers the rest of India and neighbouring countries by mid-July.

The rains, which irrigate 60 percent of India's farms, are cru-cial for rural growth as about 600 million people are depend-ent on farming.

The IMD also said the rains were likely to arrive over the Anda-mans coast around May 20.

A normal monsoon means the country receives rainfall be-tween 96-104 percent of a 50-year average of 89 centime-tres during the four-month rainy season.

Last week, P.V. Joseph, a former director at the IMD said monsoon was on track to arrive near the normal date of June 1, give or take two days.

Higher agricultural supplies triggered by normal rains could encourage the Indian government to allow overseas sale of wheat and lift export curbs on rice.

Further, normal rainfall levels can reduce demand for diesel, used to pump water from wells for irrigation when rainfall is scant, and impact demand for gold as purchases get a boost when farming incomes rise amid high crop output.

Rural areas account for about 70 percent of India's annual gold consumption.

Earlier this month, IMD Director General Ajit Tyagi told Reuters in an interview that monsoon rains were expected to withdraw on schedule, unlike last year when late end-season rains hit sugar output in the world's biggest consumer.

INDIA FORECASTS CRUCIAL MONSOON RAINS ON MAY 31 MAY 2011

A man rides a cycle rickshaw through a street amid heavy rain showers in the northern Indian city of Allahabad May 18, 2011. REUTERS/Jitendra Prakash

INDIA AWAITS KEY MONSOON RAINS MAY 2011 INDIA AWAITS KEY MONSOON RAINS JUNE 2011 INDIA'S EARLY MONSOON BOOSTS CROP HOPES JUNE 2011

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Food rights bill holds key to India farm exports plan

By Krittivas Mukherjee

NEW DELHI, May 9 (Reuters)

I ndia's grain bins are overflowing and the forecast for a nor-mal monsoon promises another bumper crop, but political disagreement over a bill to secure food rights for the poor

means the country is expected to steer clear of large-scale exports.

Shipments from the world's second-biggest producer of wheat, sugar and rice could come as a relief for governments across Asia who are trying to combat food-led inflation, but India needs to know how much to put aside for the food secu-rity bill before taking any decision on overseas sales.

"Ensuring supplies to the government's welfare schemes are more important than allowing exports for private trade," a senior food ministry official told Reuters on condition of ano-nymity because of the political sensitivity of the issue.

"Exports will be allowed after assessing local demand. The food security bill will spell out the demand for food grains."

But there is little clarity on when the food bill, an election promise from the ruling Congress party, could be ratified by parliament.

Prime Minister Manmohan Singh wants to introduce the bill in parliament this year but members of the National Advisory Council (NAC), which is helping the government draft the bill, and finance ministry officials think the target is too ambitious.

The NAC, headed by Sonia Gandhi, the powerful chief of the Congress party, has suggested widening subsidies to 75 per-cent of the billion-plus population. India currently provides subsidised grains to about 30 percent of its people.

But the finance ministry and the planning commission, which charts India's economic development, are seeking a lower number of beneficiaries, mindful of its impact on the country's plans to cut the fiscal deficit to a targeted 4.6 per-cent in 2011/12.

India will also need to weigh concerns about persistently high food inflation, currently just under 9 percent, against leaving stores to rot when global prices are near record highs. And then there is the uncertainty of monsoon fore-casts.

"Betting on a favourable monsoon you may get it right, but what if you get it wrong? Will the opposition spare you if you have to go and buy at current global prices?" a senior leader of India's Congress party, which heads the country's coalition government, told Reuters.

A failed monsoon could force India into the international markets as a buyer, as happened in 2009, when India suf-fered its worst drought since 1972 after initial forecasts had called for normal rains. That year, India had to import sugar, driving up global prices to their highest in three decades.

LARGE EXPORTS UNLIKELY

Wheat reserves have swelled to more than double the gov-ernment's target of 8.2 million tonnes, and rice output is expected to be well above demand, prompting industry and trade to demand that export curbs are lifted.

Exports of all but small amounts of special quality rice re-main restricted, while on wheat a decision is still pending after the farm minister called for lifting the ban. A panel of ministers headed by India's finance minister, Pranab Muk-herjee, is yet to take a call on allowing wheat exports.

But huge domestic stocks are seen by an inflation-hit gov-ernment more as an insurance against high global prices than an impetus to sell overseas, analysts said.


INDIA FORECASTS CRUCIAL MONSOON RAINS ON MAY 31 MAY 2011 INDIA AWAITS KEY MONSOON RAINS MAY 2011 INDIA AWAITS KEY MONSOON RAINS JUNE 2011 INDIA'S EARLY MONSOON BOOSTS CROP HOPES JUNE 2011

9

U.S. wheat futures leapt about 47 percent last year as in-clement weather in various places, including the Black Sea region, slashed global supplies.

This year, prices are down about 8 percent, but investors have been coming back to the market on crop weather concerns in the U.S. and Europe.

Traders said Indian wheat prices were around $300 per tonne free on board, while importers such as Japan and Iran are cur-rently importing U.S. wheat at around $360 a tonne, indicat-ing competitiveness of Indian wheat.

"Even within the government there is disagreement - the farm ministry wants exports, the food ministry doesn't because it is worried about inflation," said political commentator Paranjoy Guha Thakurta.

"Until you have clarity over the food security bill you will not have free flowing exports."

The NAC wants the poorest of families to be given 35 kg (77 lbs) of rice at 6 US cents a kg a month, with those a bit better off to be given 20 kg. About 40 percent of India's 1.2 billion population lives below the U.N. estimated poverty line. India currently needs around 4 million tonnes of grain every month to sell to the poor at cheaper rates.

The proposed food law could double the nearly $12 billion in the year to end-March 2011 -- about 1 percent of gross domes-tic product and 5 percent of total government spending -- that India spent to provide cheap grains and pulses through a public distribution system.

India's NHPC hopes to meet power target on good monsoon NEW DELHI, May 5 (Reuters)

I ndian state-run energy company NHPC Ltd hopes to gen-erate more than 18.6 billion kilowatt hour (bkwh) of power in 2011/12, based on expectations of normal monsoon

rains, Chairman A.B.L. Srivastava said on Thursday.

India's monsoon rains replenish reservoirs and lift ground-water levels, allowing better irrigation and greater generation of hydropower.

"Our reservoir conditions are well. Last year, our target was 18 bkwh and we produced 18.5 bkwh. This fiscal, we hope to cross the target of 18.6 bkwh," he said.

Last month, India's weather office had forecast normal mon-soon rains for the second straight year in 2011, brightening prospects of higher water levels at reservoirs.

Srivastava also said the company would install 1,080 mega-watts of new capacity in the current year that began on April 1.

The company plans capital expenditure of about 50 billion rupees ($1.1 billion) in 2011/12 versus 38 billion rupees last fiscal, when it added 120 megawatts capacity, he said. He said NHPC's current generation capacity stands at 5,295 megawatts.



10

India's weather office sees on schedule monsoon retreat By Mayank Bhardwaj and Ratnajyoti Dutta

NEW DELHI, May 4 (Reuters)

I ndia's June-September monsoon rains are expected to withdraw on schedule, the chief of the weather office said on Wednesday, unlike last year when late end-season rains

hit sugar output in the world's biggest consumer.

Monsoon rains irrigate around 40 percent of farms in India, which is the world's second-biggest producer of rice, wheat, sugar and cotton, and are crucial for the livelihoods of many of the two-thirds of India's 1.2 billion who live in rural areas.

Agriculture contributes around 14.6 percent to the trillion-dollar economy and rains can also impact inflation in the country, one of the world's biggest consumers of farm prod-ucts. The La Nina weather phenomenon was already weaken-ing, Ajit Tyagi, director-general of state-run India Meteorologi-cal Department, told Reuters in an interview. After weakening, La Nina, which prolongs monsoon rains in South Asia, enters a neutral phase -- when it has no influence on rainfall -- which typically continues for a few months before El Nino, the oppo-site weather phenomenon, sets in.

"This year we do not expect late withdrawal of rains unlike last year which was an abnormal one. There were heavy rains in August-September and withdrawal too was late," Tyagi said.

After the worst drought in nearly four decades in 2009, last year monsoon rains started retreating only from late Septem-ber, delayed by almost three weeks. Forecasting India's mon-soon can be difficult. In 2009, the weather office had forecast a normal monsoon but the season turned out to be the driest since 1972.

In 2010, weather officials had forecast a normal monsoon but could not predict the timing of its withdrawal which was de-layed due to La Nina. Late withdrawal of rains leads to lower recovery of sugar from cane, hitting output.

A timely withdrawal of the monsoon, which delivers more than 70 percent of annual rainfall, will boost output and may en-courage the government to allow sugar exports in 2012 for a second straight year.

For a graphic on India monsoon and key summer crops

( http://link.reuters.com/zux88r )

For a graphic on India monsoon - forecast vs actual

( http://link.reuters.com/xux88r )

"Timely withdrawal will help sugar production next year. Last year's late withdrawal had reduced recovery by 2.5 percent and also delayed start of the 2010/11 crushing season," said Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories, a producers' body of 250 mills.

In December, Farm Minister Sharad Pawar said mills would be allowed to export 500,000 tonnes. A rise in domestic food prices later forced the government to put the decision on hold. India finally permitted mills to export only last month.

The delay in supplies from India helped benchmark New York sugar prices touch a 30-year high of 36.08 cents per lb in February.

"The weather office has already forecast a normal monsoon and if the withdrawal is also on schedule, I see a strong possi-bility of India exporting sugar in the next season," Kumar said.

Tyagi, who last month forecast 2011 rains to be normal, said his office would announce the likely date of the onset of the monsoon over the southern Kerala coast in mid-May.



11

India normal monsoon forecast to boost farm sector By Mayank Bhardwaj and Ratnajyoti Dutta

NEW DELHI, April 19 (Reuters)

I ndia on Tuesday forecast normal rains for the 2011 mon-soon, strengthening the prospects of a plentiful farm out-put that could help bring relief to Asia's third-largest econ-

omy in its battle with high prices.

Rainfall is likely to be 98 percent of the long-term average, Earth Sciences Minister Pawan Kumar Bansal told reporters, adding that the forecast would be reviewed in June when the monsoon, which irrigates 60 percent of Indian farms, arrives.

Prime Minister Manmohan Singh's government, which was voted to power largely on rural support, has struggled with double-digit inflation for most of its second term.

A good monsoon would be able to do what repeated raising of central bank rates has failed to do -- cool off inflation.

Good rains could not only help instil investor confidence in an economy projected to grow at about 9 percent in 2011/12 but also boost food output in one of the world's top consumers and producers of a range of agricultural commodities, poten-tially helping Asian governments to battle food inflation.

"Normal monsoon will bring some optimism that food infla-tion can be contained with higher food grain production," said Harish Galipelli, vice-president of JRG Wealth Management.

"Kharif (summer sown) crop is bigger in the country, and a normal monsoon will help. But any deviation in the monsoon rains may not be good news for the economy."

A failed monsoon could force India into the international mar-kets as a buyer, as happened in 2009 after initial forecasts had called for normal rains. That year, Indian purchases of sugar sent prices to a record high.

A normal monsoon means the country receives rainfall be-tween 96-104 percent of a 50-year average of 89 centimetres during the four-month rainy season, according to the weather office classification.

MAYBE NOT ENOUGH

Normal rains, however, may not help in the fight against infla-tion beyond generating positive sentiment. With agriculture accounting for only about 14.6 percent of GDP, its overall con-tribution to growth remains limited, some analysts said.

"It is too premature to make any prediction of the inflation trajectory just based on the monsoon forecast. What matters is not just the normal monsoon but also the geographical dis-tribution of the rains," Rupa Rege Nitsure, chief economist of Bank of Baroda, told Reuters.

"Secondly with global warming and other environmental haz-ards, the credibility of the early forecast is not very high. So it is not correct to base any projection of growth or inflation on these forecasts alone. It is only a positive, feel-good factor for the time being."

The head of India's metrological department said the weather pattern La Nina, which brings more than usual rain, would remain neutral. "So long as La Nina condition remains neu-tral, there is no cause for worry," Ajit Tyagi said.

Earlier, the deputy head of India's main state-run agriculture research organisation said good rains were expected over

southern and central regions, boosting prospects for rice and soybean crops, but lower rainfall in the western region could impact reservoirs.

Monsoon forecasting in India is carried out by government-run organisations and has significant political implications in a country where more than 60 percent of voters are in rural communities and form the bulk of the government's support base. The ruling Congress party, which is mired in a slew of corruption charges, is fighting state elections. Analysts say an unfavourable forecast was not likely because of its impact on the confidence of rural voters.

"At this juncture, the government has limited choice in an-nouncing a bad monsoon, which may also lead to a spike in food prices," said S. Raghuraman, a New Delhi-based inde-pendent commodities analyst.

Bad rainfall results put pressure on the government as farm-ers demand higher rates for produce and ask for waivers of loan repayment and electricity charges, hitting public fi-nances. The government subsidises key crop prices to contain inflation and ensure half a billion poor -- many of whom spend up to 60 percent of their incomes on food -- can afford to eat.

Monsoon rains also impact demand for gold in India, the world's top consumer of the metal, as purchases get a boost when farming incomes rise amid high crop output. Rural ar-eas account for about 70 percent of India's annual gold con-sumption.

Other sectors of the trillion-dollar economy also benefit as farmers spend their cash on cars, motorcycles and consumer goods. Good rainfall also reduces demand for diesel, used to pump water from wells for irrigation when rainfall is scant.

FACTBOX-India monsoon and impact on economy April 13 (Reuters)

M onsoon rains from June to September are a key fac-tor for global commodities markets as they influence output of various crops in India, which is among the

world's leading producers and consumers of wheat, rice, sugar and edible oils.

Farming makes up about a fifth of the gross domestic product (GDP) in India, 60 percent of whose people live in rural areas.

The seasonal rains usually start on the southern Kerala coast on June 1 and cover half the country by the first week of July.

About half of India's farm output comes from crops sown dur-ing the four-month-long monsoon season. The increased soil moisture from the rains is also important for key winter crops such as wheat and rapeseed. Here are facts on the monsoon and its impact:

CROPS

-- RICE: Indian farmers plant paddy at the start of the mon-soon season. The key areas for rice are the eastern and south-ern regions . The crop is heavily dependent on rains for irriga-tion. A bumper harvest last year means India has ample stocks. But exports are still banned -- apart from select non-basmati grains -- and normal rains could prompt the govern-ment to ease curbs on overseas sales.



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Any decision is likely to come after the end ofJuly, when the monsoon impact is clearer.

The government expects production of 94.11 million tonnes in the crop year to June 2011, according to its latest forecast.

-- SOYBEAN: A vital crop for the world's top importer of edible oils. Higher oilseed output would rein in the growth of edible oil imports and increase oilmeal exports. Output in the 2010/11 crop year is seen at 12.59 million tonnes, according to the latest government forecasts.

-- SUGARCANE: The world's top sugar producer after Brazil could allow exports of the sweetener in the next season from Oct. 1 if rains are favourable for output. India has said exports of 500,000 tonnes can be made in the current sugar year to September 2011. The government is expecting output of 24.5 million tonnes in the 2010/11 crop year. Consumption should be some 22.5 million tonnes.

-- OTHERS: Corn, lentils and cotton, important crops in west-ern and central India, also depend heavily on the seasonal rains. India remains a net importer of lentils.

IRRIGATION, POWER

-- Monsoon rains replenish reservoirs and lift ground-water levels, allowing better irrigation and greater generation of hydropower. About 40 percent of India's arable land has irri-gation facilities. The rest depends on the monsoon rains.

-- Higher rainfall levels can also reduce demand for diesel, used to pump water from wells for irrigation when rainfall is scant.

ECONOMY AND MARKETS

-- India is largely self-sufficient in major foodgrains such as rice and wheat, but drought can send the country to interna-

tional markets, as in 2009 when India had to import sugar, sending global prices to record highs and pushing up infla-tion. Ample monsoon rains lift domestic demand, as higher farm output increases the incomes of rural people, who make up about two-thirds of India's population of 1.2 billion.

-- Higher demand for goods and services can boost economic growth. Also, inflation could ease because a better supply of crops would lead to lower prices and take the pressure off the government to step in with fiscal measures and extra subsi-dies. A stronger economic outlook can lift sentiment in equity markets, particularly of firms that sell products in rural areas, including consumer goods and automobiles.

Q+A-India's normal monsoon progress, impact NEW DELHI, April 11 (Reuters) -

T he chance of a normal southwest monsoon for a second straight year in 2011 has raised hopes of higher farm output in India that could tame high food prices and

help persuade the government to free rice and wheat exports.

Exports from India would raise supply in Asia and help gov-ernments across the region as they battle food inflation.

Success or failure of the annual June-September monsoon also impacts the broader economy and can spill over into global markets.

The impact of the monsoon on domestic inflation helps shape even monetary policy. India is also one of the world's leading producers and consumers of several commodities such as sugar, grains, oilseeds and cooking oils.


Villagers carry pitchers filled with drinking water after visiting a well at Meni village in the western Indian state of Gujarat April 16, 2011. South Asia is likely to receive nor-mal monsoon rains in 2011, a gathering of global weather forecasters said on Friday, good news for countries such as India whose massive demand for farm goods impact international markets. REUTERS/Amit Dave


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WHAT DOES A "NORMAL" MONSOON MEAN?

A normal monsoon means the country receives rainfall be-tween 96-104 percent of a 50-year average of 89 centimetres during the four-month rainy season from June.

WHEN DOES THE MONSOON ARRIVE IN INDIA?

The southwest monsoon arrives in India on the southern coast and usually hits the southern state of Kerala on June 1. After hitting the southern tip, it takes about a week to cover the coffee, tea and rubber growing areas of south India.

HOW FAR AND FAST DOES THE MONSOON TRAVEL?

The monsoon spreads to the rice-growing areas of eastern parts of the country in the first 10 days.

It usually covers half of the country in the first fortnight and enters the oilseed producing areas of central India in the third week of June. Cotton-growing areas in the western region get rains by the first week of July.

By mid-July, the monsoon covers the entire country.

DOES A NORMAL MONSOON RULE OUT DROUGHT?

No. A normal monsoon indicates overall rainfall to be good but does not rule out droughts in some areas.

So, distribution of rains over key crop regions is important for the overall performance of the monsoon.

HOW DOES THE MONSOON IMPACT CROPS?

About 60 percent of farms depend on rainfall. Even in regions which have irrigation facilities, monsoon rains are beneficial for crops and helps improve yields.

DOES THE MONSOON IMPACT OTHER SECTORS OF THE ECONOMY?

The farm sector's contribution to the overall economy is 14.6 percent. It is the key source of income for the rural population, which accounts for two-thirds of India's 1.2 billion.

Normal rains help improve farm incomes and thus increase demand for cars, motorcycles and consumer goods. Farmers often turn to gold as an option to invest their extra cash in a good output year, boosting demand -- and prices. But drought increases rural distress, prompting the government to increase expenditures on subsidies and welfare schemes for rural areas, which provide the bulk of its support.

DOES IT IMPACT MONETARY POLICY?

India is currently struggling with high inflation, driven in part by food and fuel prices. A normal monsoon would ease sup-plies and could rein in food prices. It would also help to sup-port incomes and therefore allow the government more flexi-bility on passing on high oil prices to consumers and cutting subsidy bills. Reducing inflation could prompt the central bank to ease monetary policy after eight successive interest rate rises.

HOW DOES THE MONSOON IMPACT THE ENERGY SECTOR?

Monsoon rains replenish reservoirs and increase ground-water levels, improving irrigation -- which cuts the need for diesel in pumping. It also helps hydroelectric power generation.

If a drought means drinking water is scarce, the government can decide to cut supply to power generators or farms and provide more water to households. Rainfall can cut demand for diesel, which is used to pump water from wells for irriga-tion.

A fruit vendor takes shelter under his cycle-stall during a monsoon shower in New Delhi September 20, 2010. India's monsoon rains were 19 percent above normal in the week leading up to Sept. 15, the weather office said last week. REUTERS/Parivartan Sharma


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INDIA FORECASTS CRUCIAL MONSOON RAINS ON MAY 31 MAY 2011 INDIA AWAITS KEY MONSOON RAINS MAY 2011

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INDIA AWAITS KEY MONSOON RAINS JUNE 2011

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INDIA'S EARLY MONSOON BOOSTS CROP HOPES JUNE 2011

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