Better output prospects pulls prices of agri commodities down

Agri commodities’ price declined in futures trade amid concerns of a revival in rainfalls this monsoon season raising thereby prospects of a recovery in kharif output.

While castor seed and chana for near month delivery hit the lower circuit to close on Saturday at Rs 3375 a quintal and Rs 4377 a quintal respectively, Kapas for delivery in February plunged by 3% to end the week at Rs 860 per 20 kgs. Commodities like Shankar kapas and others also fell severely.

The Indian Meteorological Department (IMD) in its latest report said that over 75% of rainfall deficit was bridged since the revival in monsoon rainfall in the first week of August. Since this season’s rainfall is expected to see withdrawal in a week, IMD hoped the entire deficit to be met before the end of the current monsoon period.

Although, the monsoon rainfall was late in some major kharif crop growing areas raising thereby drought concerns, sowing intensified with the restoration in the monsoon rainfalls. As a consequence, not only the deficit in sowing was fully met but also raised prospects of higher output this year as compared to last year.

Indranil Sen Gupta, India Economist of DSP Merrill Lynch (India), said the recent revival of the monsoon has pulled the seasonal rainfall deficit down to 9% of normal – below the 10% drought point - from 22% in mid-July. The revival should save the winter - rabi - crop from drought. However, it is too late for a recovery in kharif crops’ full recovery. Till now, the rainfall deficiency has further receded to 5%.

Ministry of Agriculture, meanwhile, forecast India’s total foodgrains production to narrow to witness a marginal fall of 10% in the kharif season this year to 117.19 million tonnes due to deficient monsoon and drought in some states. The ministry had earlier forecast a higher decline in kharif foodgrains output.

Kharif sowing, started in June, is almost complete and harvest will start from early October. In kharif season last year, the production of foodgrains was 129.94 million tonnes.

The first advance estimate forecasts rice output this year to fall to 85.56 million tonnes from a record 91.53 million tonnes last year. Pulses production is projected to drop to about five million tonnes from 6.16 million tonnes, while coarse cereals output is estimated to fall to a little over 26 million tonnes from 32.26 million tonnes.
Similarly, cotton production is seen at over 32 million bales (of 170 kg each) from 35.2 million bales. Sugarcane output is estimated to the same as at last year's.

Chana sowing condition has become in its major growing states including Madhy Pradesh and Rajasthan with higher soil moisture. In central India also, farmers were seen enthusiastic to bring unsown area under tur and urad on revival in the monsoon rainfalls. Ministry of Agriculture, therefore, has reported in increase in sowing area under kharif crops.

Ajay Kedia, managing director of broking firm Kedia Commodity, attributed the fall in agri price to a repercussion of global trend in India. Globally, agri crop output sentiment has suddenly become positive with less supply worry. Last month, prices were going up on anticipated festival demand. While the festival demand sentiment in retail market will continue for some more time, the same in futures market receded, he added.

Free fall (Rs/quintal)
Commodity	Sep 22	Sep 21	Change (%)
Castor seed	3,375	3,514	(-) 3.96
Chana	4,377	4,547	(-)3.74
Chilli (Dec)	5,262	5,330	(-)1.28
Coriander	4,023	4,095	(-)1.76
Kapas(Feb)	897.5	924	(-)3.95
Pepper	43,200	43,650	(-)1.03
Refined soy oil (10 kgs)	709	718.7	(-)1.35
Shankar kapas (20 kgs)	860	886.5	(-)2.99
Turmeric	5,640	5,678	(-)0.67