Agri commodities' prices down on output prospects

Higher production this season, more acreage for next concerns farmers, excessive rainfalls may damage crops, though

Prices of agricultural commodities have fallen sharply over the last two months on higher output estimates for the current year and better crop prospects next season, due to a favourable and evenly spread monsoon rainfall.

All agri commodity prices, including the sensitive ones like oilseeds and pulses, have recorded a decline of up to 25-30 per cent since the beginning of the monsoon. Reports say 30 of 36 meteorological sub-divisions in India have received normal to excess rainfall, resulting in higher sowing of kharif crops.

The price decline during the lean sowing season might be a barrier for farmers to continuing their sowing in traditional crops; they might shift to more remunerative ones.

“The price decline in agri commodities can be attributed to two major factors. First, the government estimated higher availability of foodgrain, on upward revision of their output in the fourth advanced estimates. Second, the acreage has been higher this season across all commodities, which raised prospects of better output next year as well,” said Prerna Desai, vice-president (research), Kotak Commodity Services.

Against 250.14 million tonnes in the second advance estimates, the government revised the overall foodgrain output to 255.36 mt in the fourth advance estimates. This is against the output target of 254.24 mt.

For the next season, the government hopes for a new record, on higher sowing. Data from the ministry of agriculture showed sowing had picked up in almost all crops this year. As on July 26, the sowing under kharif crops had shot up 17.8 per cent to 74.78 mn hectares as against 63.5 mn ha around the same time last year.

Amid expectations of a record output this year, pulses’ prices have plunged 25 per cent in the spot market. Tur and urad are quoted at Rs 3,700 a quintal and Rs 3,200 a qtl against their minimum support price (MSP) of Rs 4,300 a qtl. Chana is hovering around Rs 2,600 a qtl, also its MSP.

“What is the use of announcing the MSP when the government does not come forward to protect farmers’ interest in case the price of pulses falls below the MSP? We urge the ministry of agriculture to nominate a public sector procurement agency like Nafed (National Agricultural Cooperative Marketing Federation of India) to start procuring pulses like they do for cotton,” said Praveen Dongre, chief executive officer, Glencore, a multinational commodity trading firm.

India imports around four mt of pulses and 9.5 mt of edible oil every year. Hence, it is important to increase domestic output to contain dollar outgo, a major factor for the burgeoning current account deficit. Himat Chandra, partner at Trimurthi International, a Vashi-based pulses trader, said disincentivising farmers by not controlling price falls would result in growing dependence on imported stuff.

The next few weeks would be crucial for agri crops from the rainfall point of view. “If the incessant rains continue as seen so far this season, the lack of sunshine would start affecting the crop negatively. So, a clear price trend would emerge in the next few weeks,” said Desai.