Agri futures fall on low physical demand

Agricultural commodity prices have started falling in the past one week. The prices have come down by 5-15 per cent. How long these will fall is not known but traders and analysts say that more rise would not be sustainable.

As far-month futures also indicate that current prices are not sustainable, it will take a while before a clear trend emerges. But, there is no demand at higher prices in the physical market.

Jayant Manglik, Head, Religare Commodities, said “prices have overshot in agri commodities and as they are at no parity to prevailing prices in the physical market, traders feel prices in futures may also not sustain”. He feels that in the next one or two months, the lack of demand support in the spot market at higher prices could lead to a further fall in agriculture commodities in futures, too.
 

TUMBLE DOWN Prices of near month contract, NCDEX Future
Commodity (Rs/Quintal)	Dec 1, 2009	Dec 7, 2009	% chg
Turmeric-Nizamabad	10266.00	8779.00	-14.48
Jeera Unjha	16382.00	14564.00	-11.10
Pepper	15897.00	14883.00	-6.38
Guar Seed-Jodhpur	2841.00	2731.00	-3.87
Chana New Delhi	2612.00	2524.00	-3.37
NCDEX Agri Spot Index	2859.03	2745.69	-3.96
Source: NCDEX

The fall in prices of commodities like chana, guarseed and spices like jeera, turmeric, etc has been attributed to profit-booking and lack of buying interest in the physical market due to very high prices. Turmeric lost 14.5 per cent, while jeera lost 11 per cent in the past week on NCDEX futures. Pepper lost 6.38 per cent and so were cotton prices, by 18.8 per cent in a week.

Pranav Mer, research analyst with IndiaInfoline Commodities, said “some of the spices like turmeric and jeera are trading at their lifetime high and both domestic and export demand is shying away”.

Hedgers and arbitragers also seem to have unwound their positions at higher prices, leading to fall in chana futures. Prices were down in the physical market, as well as in futures. Guar seed prices were down because guar gum makers are not in a position to bear high input cost and many of them have reduced production.