Agri traders defy El Nino fears

Agri commodities have seen a sharp fall in prices since the Bhartiya Janta Party got majority. In last few weeks from 16 May, most agriculture commodities have seen a fall between 3-9%. Recent projections of lower monsoon with fear of El Nino has also not affected subdues sentiment in agri markets. Traders and analysts say that arrivals in case of rabi commodities and fear of actions on futures in essential commodities together have influenced the sentiment.

"Major arrival season is naturally putting its pressure on most of the crops like wheat, chana, castor, barley, maize," Jagdeep Grewal, head of Research at Kunwarji Commodities which is an Ahmedabad based broking firm active in spot and futures market.

In last three weeks soybean, spices, oils and oil seeds grains like maize, wheat and cash crops like sugar and cotton are still trading lower. Only commodities like coriander, cotton and rubber have seen some recover in past few days. What seems worry some is the case of commodities like onion and potatoes that have started increasing in last few days on hoarding by traders as both being sensitive commodities and productions centres are likely to be affected of there is monsoon deficiency.

Grewal said that, "With this seasonal factor two more forces are keeping participants away from commodities i.e. a good rally in equity market and rumors of administrative action, these two forces are acting so strong that El-nino forecast is unable to make positive move in prices. Poor monsoon impact on prices would be felt once practically rain deficiency will be seen."

Forward Markets Commission has officially denied delisting of commodities. Chairman, Ramesh Abhishek told Business Standard that, "there is no proposal to delist any commodities from futures market." However fundamentals are favouring subdued market and hence prices in general have not increased.

Since last few days both onion and potato prices have started moving up. Potato prices in Agra mandi has seen a jump from Rs.1215 a quintal in beginning of the month to Rs.1380 today. In case of onion there is acute shortage of seeds which is expected to restrict farmers from sowing more. Onion is up in Lasalgaon mandi near Nasik. Prices up from Rs.1025 a quintal in beginning of June to Rs.1200 today.

An analyst with Religare Commodities said that, "in physical markets traders are seating on inventories and hence they are defying El Nino fears as farmers have options of shifting crops in case the fears come true. They are taking solace from the fact that there is no prediction of draught."

Religare Commodities also said that even in case of agri commodities having strong international linkages like edible oils, soybean and cotton are down reflecting sluggish trends globally.