Barring onion and potato, agri prices sag in recent weeks

Traders and analysts say rabi crop arrivals have influenced sentiment, El Niño fears have not changed the situation

Agricultural commodities have seen a sharp fall in prices since the general election result. From May 16, most agri commodities have seen a price of three to nine per cent.

Recent projections of a lower monsoon due to the El Niño weather phenomenon has not changed this. Traders and analysts say rabi crop arrivals and fear of action on futures in essential commodities have influenced the sentiment.

"Major (new) arrivals are naturally putting pressure on wheat, chana, castor, barley and maize," said Jagdeep Grewal, head of research at Kunwarji Commodities, an Ahmedabad-based broking firm active in the spot and futures market.

Soybean, spices, oils and oilseeds, maize and wheat, and the sugar and cotton cash crops are trading lower in the past three weeks. Recently, there has been some recovery in coriander, cotton and rubber. Onions and potato prices have started increasing in recent days, reportedly on hoarding by traders; both being sensitive commodities, they are likely to be affected by a monsoon deficiency.

Says Grewal, "With this seasonal factor, two more forces are keeping participants away from commodities - a good rally in the equity market and rumours of administrative action (on high prices). Due to these two forces, the El Niño forecast is unable to make a positive move in prices. A poor monsoon's impact on prices would be felt once rain deficiency is practically seen."

In the past few days, as mentioned earlier, both onion and potato prices have started moving up. Potato prices in the Agra mandi have gone from Rs 1,215 a quintal in the beginning of the month to Rs 1,380. In onion, there is an acute shortage of seeds, expected to restrict farmers from sowing more.

Onion is up in the big Lasalgaon mandi near Nashik, to Rs 1,200 a qtl from Rs 1,025 at the beginning of June. An analyst with Religare Commodities said, "In the physical markets, traders are sitting on inventories. Farmers have the options of shifting crops if the (El Niño) fears come true. They are taking solace from the fact that there is no prediction of drought."