India rice output set for biggest drop in nearly 20 years as weak rains hit yields

Mumbai: India's rice production is set to fall this year for the first time in a decade, and by the most in nearly 20 years, as below-normal rainfall during the crop's maturation period threatens to cut yields, industry officials told Reuters.

The drop in the world's biggest rice-producing and exporting country will lift local prices and make exports expensive at a time when prices are already rising in other exporting countries such as Thailand and Vietnam.

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However, massive inventories built up from record harvests in recent years will allow New Delhi to maintain exports at record levels despite the lower output.

"Yields will be lower due to reduced rainfall. We estimate that production could decline by around 10 million metric tons," said B.V. Krishna Rao, president of the Rice Exporters Association.

That would be nearly a 6.5% drop from last year's record 154 million tons and be the biggest decline since 2009/10, when an El Nino-induced drought curtailed production.

The prolonged dry spell in recent weeks has significantly reduced yield potential in southern and eastern states, Rao said.

India has so far received 15% lower rainfall than normal since the four-month-long monsoon season started on June 1, weather ⁠department data showed. But in some rice-growing states, ​the deficit is as high ​as 42%.

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The crop area of summer-sown rice stood at 42.68 million hectares as of September 11, nearly 4% lower than a year earlier, government data showed.

Summer-sown crops account for more than 80% of total production. Winter-sown crops account for the rest.

The area under winter-sown rice is also likely to fall as reservoirs are holding less water than normal, said Nitin Gupta, deputy country head at Olam Agri India, an agricultural commodity trader.

Local rice prices have already started to rise on expectations of lower production, lifting export prices to their highest level in more than a year.

"This year, farmers growing premium varieties will get higher prices in the open market. That will also lead to lower sales to the government," said Rao.

With India holding massive rice stockpiles, it should still be able to export the grain without imposing restrictions, said a New Delhi-based dealer with a global trading house.

State reserves of rice, including unmilled paddy, totalled a ​record 59.6 million tons as of September 1, far exceeding the government's ​target of 10.3 million tons by October 1.