Potato futures do a guar, rise sharply on low output estimates

Potato has suddenly become a favourite commodity of traders on the futures platform. Along with prices, open interest (OI), has gone up significantly since the beginning of this year, which indicates traders see a potential in potato contracts.

Prices have almost doubled since the beginning of this year, to trade on Thursday at Rs 7-9 a kg in the Vashi Agricultural Produce Market Committee (APMC) market. They have been in this range for 10-odd days on supply shortage from major producing centres such as Agra in Uttar Pradesh and Tarkeshwar in West Bengal.

Prices for delivery in April on the National Commodity and Derivatives Exchange (NCDEX) also doubled to close at Rs 1,039 a quintal on Thursday, compared to Rs 590 a quintal on January 3. In the futures market, the near-month contract shot up similarly, which a section of traders term as speculative trading.

“Potato futures have been trading higher than spot prices on speculation. As a result, spot prices are also expected to move up in the coming days,” said Sanjeev Mittal, an Agra-based trader.

Others like Ashok Valunj, director of the APMC, Vashi, feel the fundamentals also remain supportive for the commodity to move upward. “Prices are going up due a 15-20 per cent fall in production estimates. Arrivals, too, remained inadequate in major mandis,” said Valunj.

Against the normal arrival of 90-100 trucks (of 14 tonnes each), only 70 trucks reported unloading on Thursday, due to low availability of trucks in Uttar Pradesh. According to a Mumbai-based trader, “There was election mood in Uttar Pradesh during the last week, which coincided with Holi celebration across the country. Hence, very few trucks were available for potato transportation, which resulted in lower availability in major consuming mandis, including Vashi.”

Traders’ sudden attraction towards potato can also be gauged from the significant increase in open interest (OI) in recent weeks on the Multi Commodity Exchange (MCX). The near-month contract for Tarkeshwar delivery on MCX recorded a total OI of a staggering 41.70 tonnes on March 5, which gradually plunged to 19.5 tonnes on March 12, from a small beginning of 1.5 tonnes on March 3.

On the NCDEX, 333 lots of potato worth Rs 3 crore were traded on March 3. This figure shot up to 2,328 lots valued at Rs 39 crore on Thursday. The exchange recorded a staggering surge in OI at 9,870 lots on March 13, compared to just 795 lots on January 3.

The National Horticultural Research and Development Foundation (NHRDF), a public sector agri research agency, has estimated a marginal decline in output this year, thanks to a disease that damaged the crop.

NHRDF estimated overall output at 40 million tonnes (mt) in 2012-13, compared to 43.6 mt in the previous year. Against this, the industry forecasts total output to decline to 36 mt on late blight disease. At this level, the country will have no surplus potato this season, with output being equal to the overall estimated consumption.

According to a trader, nearly 25 per cent of the current season’s output has already reached cold storages, which is unlikely to be released in the near future. Stockists generally prefer to release heldover stock during lean seasons for higher realisations.

Potato has joined the rally of other commodities like guar gum, guar seed, pepper and mentha oil that have recorded an over 200 per cent increase in the past year.