Weak Start to India’s 2026 Monsoon Raises Red Flags for Global Agri Markets

India’s 2026 southwest monsoon has started with one of the driest Junes in over a century, sharply slowing kharif sowing and raising concerns over supplies of rice, oilseeds, cotton and feed grains. With El Niño conditions strengthening and the India Meteorological Department (IMD) projecting below-normal seasonal rainfall, agricultural and commodity markets are bracing for tighter balances and higher price volatility. Monsoon rainfall through late June is running roughly 40–42% below normal nationally, making June 2026 one of the driest Junes on record and leaving kharif acreage down about 23% year-on-year, according to government and industry data.

Introduction

The southwest monsoon, which delivers nearly 70% of India’s annual rainfall and underpins its summer (kharif) cropping season, has advanced slowly in 2026. IMD data show June rainfall at about 60% of the long-period average (LPA), ranking as the third-driest June in 100 years, with particularly large deficits in central and eastern India.

On a seasonal basis, IMD has cut its forecast and now expects June–September 2026 rainfall at around 90% of the LPA, squarely in the below-normal range and consistent with an emerging El Niño in the Pacific. This combination of a historically weak start and a drier full-season outlook is already depressing kharif sowing and prompting supply risk reassessments across key agricultural commodities.

Immediate Market Impact

By late June, total kharif acreage had fallen to about 18.3 million hectares, down 22–23% from a year earlier, as a 40–42% rainfall deficit delayed planting in major producing states. Paddy (rice) area is around 25% lower year-on-year, pulses are down roughly 30%, oilseeds have dropped more than 50%, and cotton area is also significantly reduced.

Physical markets have begun to price in the risk of lower 2026/27 output. Domestic prices for oilseeds and soybean meal are firming, while rice and feed markets are watching for potential tightening later in the year despite India’s currently ample state stocks. Import demand for edible oils and possibly feed ingredients could rise if acreage losses translate into yield pressure during the critical July–September growth window.

Supply Chain Disruptions

The immediate disruption is agronomic rather than logistical: farmers in rain-fed regions have delayed or cut back sowing of water-intensive crops such as paddy and cotton, and of key oilseeds including soybean and groundnut, due to insufficient soil moisture. Reservoir levels remain adequate in aggregate but are sliding in parts of central and peninsular India, increasing the risk that irrigated areas could also face constraints if dryness persists into July.

For global supply chains, the near-term effect is mostly forward-looking: traders and processors are reassessing the reliability of Indian exports of rice, cotton and certain oilseed products for late 2026 and early 2027 shipment windows. The government already maintains restrictions on sugar exports and could tighten or prolong controls on rice or other staples if domestic price pressures intensify, creating uncertainty for buyers in Asia, Africa and the Middle East.

Commodities Potentially Affected

• Rice: Paddy acreage is down about 25% year-on-year due to deficient early monsoon rains, raising the risk of lower 2026/27 production and potential continuation or tightening of export curbs despite currently high public stocks.
• Oilseeds (soybean, groundnut, sesame, others): Oilseed area has plunged more than 50% as of late June; soybean and groundnut sowing in particular are sharply lower, implying stronger import demand for vegetable oils and possible firmness in protein meal prices.
• Cotton: Cotton planting is lagging amid weak rainfall and delayed monsoon onset, with national acreage significantly below last year, adding upside risk to global cotton prices if yield losses follow.
• Pulses: Pulses sowing is down by about 30%, which could tighten India’s domestic pulse balance later in the season and raise import demand from traditional suppliers such as Canada, Australia and East Africa.
• Feed grains and by-products: Lower maize and oilseed output would reduce domestic availability of feed ingredients, potentially supporting prices for corn, soybean meal and alternative feeds in both Indian and regional markets.
• Sugar: While sugarcane is less affected so far and sugarcane area has edged higher, a sustained rainfall deficit could cap yield potential and reinforce the case for India to maintain its de facto export ban through the coming season.

Regional Trade Implications

India is the world’s largest rice exporter, a key supplier of cotton and an important player in vegetable oil and meal markets. Any sustained hit to kharif production, especially in rice and oilseeds, would likely shift incremental demand toward Southeast Asian rice exporters, South American and Black Sea oilseed origins, and cotton from the US, Brazil and West Africa.

Import-dependent countries in South Asia, the Middle East and parts of Africa that rely heavily on Indian rice, sugar and pulses could face higher procurement costs or be forced to diversify origin risk. Conversely, exporters with surplus grains, oilseeds and cotton may benefit from improved margins if India’s exportable surplus contracts further or if policy responses tighten controls on outbound shipments.

Market Outlook

July–September will be decisive. IMD and independent forecasters expect El Niño’s influence to strengthen through the core monsoon months, keeping aggregate seasonal rainfall below normal even if weekly conditions fluctuate. Markets will closely track any recovery in rainfall, revisions to sowing data, reservoir levels and the government’s policy stance on key food exports.

In the short term, the weak start has injected a weather premium into Indian-exposed agri contracts and is likely to support regional prices for rice, vegetable oils, cotton and protein meals. Basis risks around Indian-origin supplies could widen, and volatility may increase around new crop production estimates and potential policy announcements, particularly on rice and sugar exports.

CMB Market Insight

The unusually dry opening to India’s 2026 monsoon, combined with a firm El Niño signal and below-normal seasonal rainfall outlook, constitutes a material risk event for global agricultural markets. With kharif sowing already down by more than one-fifth and key crops such as rice, pulses, oilseeds and cotton showing double-digit acreage declines, supply expectations for 2026/27 are being repriced upward on the cost curve.

For commodity traders, importers and food companies, the next 6–10 weeks will be critical for hedging and procurement strategies. Maintaining flexible origin options, monitoring India’s evolving export policies and stress-testing supply chains against a scenario of smaller Indian surpluses—especially in rice, vegetable oils and cotton—will be essential as markets navigate a monsoon season that is already off to one of the weakest starts in decades.