Ukraine crisis: Most crops trade above MSP save chana and some other pulses

Gains for farmers, but retail and wholesale inflation likely to be impacted

The Russia-Ukraine crisis, coupled with the general bullishness in agricultural commodities, has ensured after a fairly long time, that most of the 24 commodities for which the Centre declares the Minimum Support Price (MSP) are trading above it. The exceptions here are chana or gram and a few other pulses.

This might gladden the hearts of farmers, especially those who are still holding onto their stocks from the previous kharif harvest or are harvesting the latest rabi crop. But it could also impact retail and wholesale inflation going forward.

Data sourced from various market agencies and traders showed that among the crops being harvested in the ongoing rabi season, prices of mustard seed and wheat, the two biggest commodities, are selling above MSP, but chana, which is the biggest pulses grown in India is quoting below that benchmark.

Chana (Gram)

Chana prices in most markets across North India were quoted at Rs 4,700-4,800 a quintal, or 9-11 per cent lower than MSP, till Tuesday.

Moong was also selling much below its MSP of Rs 7,275 per quintal in major markets.

“Chana production is big this year while at the same time, the government is also liquidating its inventory which is keeping prices down,” Rahul Chauhan, Commodity Analyst at iGrain India told Business Standard.

The government has apparently sold chana from its inventories at Rs 4,701-4,950 a quintal--lower than the MSP of Rs 5,230.

The chana crop in the ongoing rabi season is also expected to be huge.

According to the second advance estimate of foodgrains production released some time back, chana output in 2021-22 is set to be at an all-time high of 13.12 million tonnes (up 10.16 per cent from last year).

Wheat and rice

Wheat prices across the country have shot up the past few weeks due to a surge in export demand following the Russia-Ukraine Crisis.

Market sources say wheat in most areas is selling at Rs 2,300-2,500 a quintal, while the MSP is Rs 2,015.

Indian wheat prices in the world markets had shot up to about $360 per tonne (FOB) a few days ago in the aftermath of the Russia-Ukraine crisis, cooling down a bit to $340-350 per tonne during the past few days.

Though slightly less, the current price of Indian wheat is still the cheapest among all producing countries and the absence of Ukraine and Russia from the world markets for the next few months will give Indian traders a good chance to ship record quantities of wheat this fiscal and even in FY23.

Trade and government sources said India is expected to export a record 7-7.2 million tonnes in the current financial year that ends on March 31, and could reach a fresh milestone of almost 10 million tonnes in FY23, if global market conditions remain benign and needless curbs on outbound shipments aren’t imposed.

India is expected to harvest a record 111 million tonnes of wheat in 2022-23 (April-March)--almost 2 million tonnes more than this year.

Paddy prices in the open markets have also risen in the past few weeks due to renewed export demand as global buyers are looking to replace costly wheat and corn with poor quality rice produced by Asian countries as animal feed.

"Demand for Indian broken rice has gone up because of higher corn prices. Feed makers are trying to replace corn with rice," Reuters news agency reported quoting B V Krishna Rao, President of India's Rice Exporters Association.

Rao said the price of 100 per cent Indian broken rice has moved up to $320 per tonne this month from $290 in February.

Mustard

Mustard prices are ruling much above the MSP largely because of overall bullishness in the global edible oil markets, which has been aggravated by the Russia-Ukraine Crisis.

Trade data shows mustard prices in Jaipur at Rs 7,000-7,100 per quintal, or 39-41 per cent more than the MSP of Rs 5,050, while in Bharatpur it was selling at Rs 6,595 per quintal a few days ago (31 per cent more than MSP).

“Mustard prices are expected to remain above MSP due to global factors, but there might be slight moderation due to increased arrivals after Holi,” Chauhan of iGrain said.

As per the second advance estimate mustard production in 2021-22 is estimated at a record 11.49 million tonnes (up 12.54 per cent from last year).

Meanwhile, Russia and Ukraine together account for almost 90 per cent of the annual 2.5 million tonnes of sunflower oil imported to India.

Sunflower oil is the third largest edible oil imported into the country, after palm and soybean oil. The stoppage of sunflower oil imports has put the entire pressure on palm oil and soybean oil whose prices have further pushed up.

The crisis has also been aggravated by Indonesia’s decision to allocate a greater proportion of its palm oil production for domestic consumption than exports.

India imports almost 60 per cent of its domestic edible demand of about 23 million tonnes every year as local oilseeds production is insufficient to feed its growing population.

On an average India imports 200,000-225,000 tonnes of sunflower oil a month, almost 70 per cent of which comes from Ukraine and 20 per cent from Russia, while the remaining 10 per cent is supplied by Argentina.

Crude sunflower oil prices have already risen by almost 16.4 per cent in the last one year while the price rise in palm and soybean oils has been even steeper.

Data shows that the landed price of crude palm oil on February 25 was almost 63 per cent more than the same period last year while that crude soybean oil was almost 54 per cent more than last year.

Other crops

Among other crops, soybean prices continue to rule above their MSP, while cotton rates are also more than the MSP.

Prices of barley traded almost 41-56 per cent more than its MSP of Rs 1635 per quintal while that of maize is quoting at almost 18 per cent more than its MSP of Rs 1,870 per quintal in major markets till yesterday.

Barley and maize supplies in the global market have also been impacted due to the Russia-Ukraine crisis. 

Area under summer crops up from last year 

Summer crops, which largely comprise rice and select pulses, have been sown in around 3.80 million hectares till Wednesday, marginally more than the 3.78 million hectares sown during the same period last year. Of this, rice has been sown in 2.53 million hectares till Thursday against 2.66 million hectares while pulses have been sown in around 0.34 million hectares against 0.27 million hectares. Oilseeds are planted in 0.52 million hectares against 0.54 million hectares. BS Reporter