Bumper groundnut crop triggers price crash; farmers hold on to stock

A bumper groundnut crop in Gujarat has led to a steep fall in prices. Consequently, farmers are holding on to stock, hoping that the government will acquire it at the minimum support price (MSP), which is higher than the market price. This, in turn, has led to a shortfall of raw material for oil mills. 

The Bharatiya Janata Party-led state government is acquiring groundnut at Rs 4,500 per quintal; the market price is Rs 3,500 per quintal. Till now, the government has acquired nearly 68,000 tonnes of groundnut, with Deputy Chief Minister Nitin Patel reiterating its decision to continue with the procurement.
 

Announced by the government in October last year, the procurement will be done in a staggered manner. “Hence, farmers are reluctant to sell at market prices lower than the MSP to oil mills," said B V Mehta, executive director, The Solvent Extractors’ Association of India (SEA).

The SEA has estimated the kharif groundnut production in Gujarat this year is a record of sorts, at 3.14 million tonnes. In the last kharif season, it was 2.94 million tonnes. Of this, roughly 50 per cent of produce has already been sold in the market by relatively small farmers who didn't have enough holding capacity. 

Area coverage under Kharif and rabi crop

“With the government procurement also being marginal at over 68,000 tonnes, the rest of the produce is still being held by farmers. We hope prices will rise. However, mills have been crying foul that even at such low market rates of Rs 3,500 per quintal, procurement of raw material is hitting their margins,”  said Mansukhbhai Jamjibhai, a farmer in Rajkot district.

This bumper crop has been cultivated despite the acreage under groundnut production in the state going down marginally to 1.6 million hectares, from 1.64 million hectares last year. “The situation for oil mills is likely to improve in the coming days,” said SEA’s Mehta.

Apart from the bumper crop, there are an estimated 110,000 tonnes of carry-forward stock with Nafed, and about 50,000-60,000 tonnes with farmers and traders in the state.

Moreover, according to industry sources, the export of groundnut is expected to be lesser than last year, despite higher output even as export of groundnut oil might not find the international market due to the disparity.