Winter, Wheat and Weather Derivatives: Will we touch 100 million in 2018?

9 out of 10 people when asked to name their favorite season will either choose Rainy or Spring or Summer. Winter is least preferred as it is biting cold and doesn’t appeal to many. Many of us want Winter to complete as soon as possible unknowing the fact that how important is Winter for Indian Economy and for the livelihood of crores of Indians. Today I will talk about why we should all keenly observe climatic conditions in Winter just like the way we are worried for high temperatures in Summer and High Rainfall in Rainy season.

Winter is the very important season as it is marks the start of Rabi crop.

Rabi crop is the one which starts in the month of October where the sowing of major crops happens. Rabi Crop falls in winter and it requires warm climate for germination of seeds and maturation and cold climate for the growth. The Major Rabi crops grown in winter are Wheat, Oat, Gram, Pea, Barley, Potato, Tomato, Onion, Oil seeds (like Rapeseed, Sunflower, Sesame, Mustard) etc. Each item listed are very much in demand in India and are consumed in heavy numbers. The highest consumed crop of the given is wheat. India’s wheat production is majorly dependent on the Winter and the production is seeing good increase year by year.

The total production in 2017 in India is 9,83,80,000 Metric Tonnes, thanks to good rainfall and good winter in the country last year. That is 9.83 Crore metric tonnes or 98.3 million metric tonnes. Will we touch 100 million this year? That’s the million-dollar question.

‘’For a Rabi season to give good crop it is most required that the temperatures before sunrise needs to be below 10 degrees and temperatures after sunrise should stay below 20 degrees’’

This kind of climatic pattern with normal rain will prove the best for Rabi Crops. At the time of harvesting it’s very important that crop should receive mildly higher temperatures which gives good harvest.

Not all the states in India produce wheat. The major part of wheat production comes from Northern Indian states. South Indian states are completely out of wheat production.

Top Wheat Producing States in India

  1. Uttar Pradesh
  2. Punjab
  3. Madhya Pradesh
  4. Haryana
  5. Rajasthan
  6. Bihar
  7. Gujarat
  8. Maharashtra
  9. West Bengal
  10. Himachal Pradesh

India’s overall production of wheat was just 10.3 million tonnes in 1966 which more than doubled to 23.2 million tonnes in 5 years by 1971. This was primarily due to green revolution. The increase in the transportation facilities has increased the consumption of wheat and by 2000 we were producing 76.3 million tonnes. By 2017 the figure touched 98.3 million tonnes.  The per capita consumption of wheat per household in 1966 was 8.5kg/month which went up to 17kg/month per household in 1971. The consumption went up to 31kg/month per household now. This is a tremendous increase mainly due to changing food habits.

The pizza, burger, roti and naan you eat are all wheat products and privatization has happened in wheat procurement and distribution as well as cultivation. Soon it will be linked to weather patterns and will be on Derivatives.

Future for Weather & Weather Derivatives in India!

Like we have seen much growth in sectors like Education, Banking, Software etc.; over the years. Weather is going to be next big thing and predicting weather will be the game changer.  The future looks bright and like we haven’t seen so many sub sectors years ago which are doing fantastically now even weather as a subject will grow and start a revolution.

This will also bring in the most awaited derivatives in the market and that is Weather Derivatives. People will then be able to trade on the Weather Futures & Weather Options. We will have newly designed contracts on weather temperatures, wind movements, production of the crops and many more. Like this a new dimension will be added to Indian Secondary market. These kinds of things are not easy to learn but are of huge importance to any Finance Student.

More on it in my future posts!!!

#Weather #Winter #India #LearningContinues