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Fourth consecutive year of normal to positive monsoon expected in 2022!

ICICI Securities 19 Apr 2022

What’s Buzzing:

The Indian Meteorological Department (IMD) in its long range forecast issued on April 14, 2022 forecasted monsoon 2022 to be normal in nature at 99% of long period average (LPA, 87 cm). Even private weather monitoring agency Skymet in the recent past forecasted monsoon 2022 to be normal in nature at 98% of LPA. 

Context:

With a sizeable proportion of domestic farming community still dependent on monsoon to water feed their farmlands, monsoons have a significant economic importance domestically. This time it is more significant amid ongoing geopolitical crises and global threat to food supply chain with India being aptly seen as a food-grain supplier to the world.

Our Perspective:

Monsoon is the annual rainfall received in June-September and constitutes ~75% of the total rainfall received annually in India. There are usually two technical factors controlling the quantum of rainfall India receives domestically, surface temperature over the eastern Pacific Ocean and dipole condition in the Indian Ocean. The IMD press release indicates lower than average surface temperature in the eastern Pacific Ocean indicating La-Nina situation (excess rainfall) throughout the monsoon season and neutral dipole conditions in the Indian Ocean at the start of monsoon season with consequent higher probability of negative reading as the season progresses. With last three years of normal to positive monsoons i.e. 110% of LPA in 2019, 109% of LPA in 2020 and 99% of LPA in 2021, normal monsoon in 2022 bodes well for the domestic agriculture sector, which is already generating record food-grain production (~316 million tonne in FY22 with Kharif crop production at 153.5 million tonne). Skymet has forecasted Monsoon 2022 to be at 107% of LPA in June, 100% - July, 95% - August and 90% - September. All eyes are now on the detailed monsoon forecast by the IMD at the end of May 2022 with colour on spatial distribution, onset date as well as rainfall coverage across months. Normal to positive monsoon is positive for domestic farm input sector including farm mechanisation as well as rural consumption in consumer durables as well as FMCG space.

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