Scarce rains are likely to pull down groundnut production by 8% this year. Apart from Gujarat, production in the other major belts have been low this year.
As per trade sources, groundnut production may not exceed 3.25 million tonne in the current kharif season. The production was around 3.50 million tonne last year.
Ever since the new crop started arriving two weeks back, it has put pressure on groundnut oil prices in the country. Moreover, the industry feels that weak export demand for peanuts and the oil has further put pressure on prices.
A leading trader from Gujarat said, "As the beginning of the monsoons was good, it increased the area under cultivation for groundnut this year. However, since the southern states faced deficient rains, the overall production in the country might fall by 8% this year."
As per agriculture department data, sowing of groundnut increased only in Gujarat but the area under cultivation declined in Andhra Pradesh and Karnataka while Rajasthan saw no change in acreage.
Total sowing as on September 30 was at 3.65 million hectares as against 3.72 million hectares. Groundnut sowing in Gujarat reached to 1.29 million hectares in this kharif reason as against 1.22 million hectares. It has decreased to 680,000 hectares against 760,000 hectares in Andhra Pradesh (AP) and Telangana. Karnataka has covered 352,000 hectares against 469,000 hectares. At Rajasthan, the sowing was done on 413,000 hectares as against 412,000 hectares last year.
Experts and trade sources estimate groundnut production in Gujarat to be about 1.5 million tonne as against 1.2 million tonne last year, up by 25%.
However, production in AP and Telangana is estimated to be around 250,000 tonne this year against 380,000 tonne last year, while in Karnataka it may be around 180,000 tonne as against 300,000 tonne last year.
The price of groundnut in the domestic market has fallen on seasonal arrivals and lower export demand. Arrival of new crop has started in Gujarat and Rajasthan and would begin in other states by the end of this month.
Groundnut bold variety has declined by Rs 5,000 to touch Rs 65,000 per tonne and Jawa quality groundnut oil decreased Rs 4,000 to Rs 75,000 a tonne in past one week. According to traders, price may further move down by Rs 5,000 in next ten days on arrival pressure. At present, daily over 175,000 bags of 40 kg arrive in the market and supply will increase to over 250,000 bags by end of October.
Niraj Adhiya of DSN Agri Brokers from Rajkot said, "The recent downfall is because of seasonal arrival pressure and market will witness more negative movement till next few months."
As per Agricultural and Processed Food Products Export Development Authority (APEDA) data, export of groundnuts from India during April-August, 2015 decreased to 180,552 tonne in comparison to 237,202 tonne during same period in the previous year, a dip of 24%. Similarly in the wholesale market, the groundnut oil price has decreased by Rs 70 to Rs 940-950 per 10 kg.
Increasing arrivals also affected price of groundnut oil. Groundnut oil prices went down by Rs 150 in the last one week to Rs 1,720-1,730 per 15 kg new tin in Saurashtra region while in rest of Gujarat it is being quoted at Rs 1,750-1,760 per 15 kg in retail market. However, compared to last year same period, the prices are higher by around Rs 300 per tin. And this has resulted in weak offtake even during festival period. Last year, in October, groundnut oil was ruling at Rs 1,450-1,460 per tin in retail market.
According to millers, new arrival of groundnut, the main raw material for groundnut oil, has started and will increase further, in turn, putting pressure on prices.
"The reason behind slow demand is higher price and change in pattern of buying. Earlier people used to buy oil for the entire year but now buyers purchase groundnut oil as per their requirements, due to this demand is not seen higher in this festival season," said Suresh Kaneriya, managing of Kaneriya Oil Industries.
Ravjibhai Mandanaka, president of Gondal Oil Mills Association said, "Crushing will increase after Navratri festivals which will pull down groundnut oil price further to Rs 900 or below in wholesale. With this, this year kharif crop in Gujarat is expected better than last year."