Can the price of pulses go higher?

Chana (Chickpea) is the biggest pulse crop in India with average production of 6.5 to 7 million tonnes a year. For the past two seasons, chana prices traded either at or below the minimum support price. This resulted in acreage shrinking by around 14 per cent year-on-year. Later, the standing crop was damaged by unseasonal rain and hail. Based on a survey in April, Edelweiss Agri Research (EAR) expects production in 2014-15 to be 4.5-5 million tonnes, lowest since 2002-03. Prices shot up from Rs 2,800 to Rs 4,800 a quintal since October 2014. However, these have now come down five-seven per cent. A record price was noted in July 2012 at Rs 5,000 a quintal. The question is wheather prices can make new record this season? Trend suggests a higher price has already started to see demand rationing, as consumers and millers opt for a cheaper substitute -yellow pea. Yellow pea, largely imported from Canada, is trading at Rs 2,500-2,700 a quintal, 50 per cent discount to chana. Due to the high demand from India, production in Canada in 2015-16 is set to rise sharply. Already, there are huge stocks of imported Canadian yellow pea in India. New crop supplies of chana from Australia would enter Indian markets from October. Threat of large imports will attract stockist selling at higher prices and thus cap the prices from making a new record.

Tur (pigeon pea) being a nine-month crop is sensitive to water stagnation. The Kharif crop of 2014-15 was severely affected, to the extent of 30 per cent, by unseasonal rains during February-March 2015. India produces around 2.8 million tonnes of tur annually. It could fall below 2 million tonnes this year. India imports an average of 0.4-0.6 milliontonnes from Burma and African nations. But, it will be difficult to increase imports, as the crop size of main supplying nation - Burma, is also down 30 per cent. However, African crop is said to be normal and the new crop will be available from October. Normal world tur production is close to 3.5 million tonnes now estimated to be 2.5 million tonnes. Currently, tur is trading at a record price and we believe prices could go higher or remain at higher levels until the arrival of new Indian crop, from January next year.

The lentil crop in India was damaged. Estimated average requirement estimates production at 0.33 million tonnes in 2014-15, down from 0.45 million tonnes last year. India imports lentils from Canada, which is also going through a bad production year. Availability is also extremely low, and the domestic prices have surged from Rs 4,500 to Rs 6,500 a quintal. Currently, the price of lentil is at an all-time high but further upside from here is less likely and the prices will come down in around three months. The near-term softening of prices is also because of the government's vigilante. The Centre has asked the state governments to take action against hoarders. It has asked the states to buy 22,659 tonnes of pulses with Nafed and offload in the retail market. To augment the domestic supplies, it has decided to import 5,000 tonnes through state-owned MMTC, and if need be more will be imported, subject to the situation in supplying countries.

The author is president and chief executive officer commodities business, Edelweiss Financial Services