After back-to-back good monsoons in 2024 and 2025, India is facing a surplus in key crops like rice, wheat, and soyabean, leading to wholesale prices dropping well below the minimum support prices (MSP). This has reversed the earlier focus on curbing high food inflation that hurt consumers, now putting pressure on farmers with low returns, prompting potential policy changes to support the farm sector.
What is the current shift in India's agricultural sector after Diwali?
Background on Recent Monsoon Impacts: Good rains in 2024 and 2025 have recharged groundwater and reservoirs, boosting crop production after the 2023-24 dry period caused by El Niño, which is a climate pattern where warm Pacific Ocean waters lead to reduced rainfall in India.
Current Surplus Situation: This has created a glut in cereals like rice and wheat, with record plantings and stocks, leading to prices falling below MSP, which is the government-set minimum price to protect farmers from sharp drops.
Policy Focus Change: Earlier, high food inflation eroded household buying power, but now low prices hurt farmers' incomes, potentially requiring measures like increased procurement to balance consumer and producer interests.
What do the infographics on central pool stocks reveal about cereal supplies?
Wheat Stocks Analysis: The chart shows wheat holdings rising to 320.33 lakh tonnes on October 1, 2025, from 237.33 lakh tonnes in 2024, exceeding the norm of 205.2 lakh tonnes by 1.5 times, indicating a buildup from higher procurement and lower offtake.
Rice Stocks Analysis: Rice stocks hit 449.38 lakh tonnes in 2025, up from 386.33 lakh tonnes in 2024 and over four times the 102.5 lakh tonnes buffer norm, reflecting oversupply from expanded kharif planting and good yields.
Overall Implications: These high stocks ensure food security but depress market prices, as excess supply outpaces demand, highlighting the need for better storage and export strategies to prevent waste and support farmers.
What is happening with soyabean prices and why are they below MSP?
Soyabean Production Details: Area sown dropped to 12 million hectares in 2025 from 13 million, with yields falling to 920 kg per hectare from 1,063 kg due to heavy rains causing waterlogging and diseases like aerial blight.
Supply-Demand Balance Analysis from Infographic: Opening stocks were 5.16 lakh tonnes in 2020-21, rising then falling to 8.94 lakh tonnes in 2024-25; production is 104.55 lakh tonnes for 2024-25, with demand at 130.15 lakh tonnes, leading to closing stocks of 4.66 lakh tonnes, showing a tighter supply but still low prices.
Reasons for Price Decline: Global bumper crops in Brazil, US, and Argentina cut exports, with soyabean meal prices dropping; domestic competition from cheaper DDGS (a ethanol byproduct) at Rs 15-17 per kg versus meal at Rs 31.5 per kg reduces demand for soyabean products.
Economic Impact on Farmers: Processors' realizations from oil (Rs 118/kg) and meal (Rs 31.5/kg) limit farmer payments to around Rs 4,245 per quintal after costs, far below MSP, contributing to estimated Rs 24 lakh crore losses for farmers from 2016-2025 due to MSP gaps.
What is Minimum Support Price (MSP) and how does it work in India?
Definition and Purpose: MSP is the price at which the government promises to buy crops from farmers to ensure they get a fair return and prevent distress sales during surpluses; it covers 23 crops including cereals, pulses, oilseeds, and commercial crops.
Calculation Process: Set by the Commission for Agricultural Costs and Prices (CACP) based on input costs, demand-supply, and market trends, then approved by the Cabinet; for 2025 kharif, soyabean MSP is Rs 5,328 per quintal, up from Rs 4,892.
Procurement Mechanism: Agencies like Food Corporation of India buy at MSP through mandis, but actual procurement is limited for many crops, leading to market prices ruling below MSP when supplies are high.
What are the broader challenges in India's farm sector and potential solutions?
Farm Distress Overview: Low prices for crops like maize (Rs 2,000-2,100 vs MSP Rs 2,400), cotton, and pulses reflect weak global sentiment and domestic oversupply, with farmer groups reporting huge income-expense gaps.
Government Role in Balancing Interests: Past focus was on export bans and stock releases to control inflation, but now shifts to pro-farmer steps like duty restorations on imports and enhanced price support schemes.
Long-Term Strategies: Improving storage, promoting crop diversification, and linking farmers to markets via e-NAM (electronic trading platform) can help; also, ethanol blending programs using maize and rice boost demand for surpluses.
How does this relate to food inflation and economic policy?
Inflation Trends: Negative food inflation in recent months eases consumer burdens but signals farmer woes; overall retail inflation may ease further in October 2025 due to base effects and softening prices.
Economic Resilience Context: India's economy remains strong amid global challenges, with low inflation supporting growth, but farm sector issues could affect rural demand if not addressed.
Policy Implications: The government may prioritize farmer support to sustain agricultural growth, which contributes about 18% to GDP and employs over 45% of the workforce.
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