Agri market started the week on a slight weak note as the recent rains in parts of Central and North-West India adversely affected the market sentiment to some extent.
Chana, Guar and Cotton showed moderate fall in prices while Spices and Oil complex recovered to some extent.
As satellite showed good rains in Central and West India, short-term dips in prices are not ruled out with monsoon rains remaining critical for the near-term market trend as of now.
After the recent surge in prices, profit booking at higher levels brought some dips to the rising rates for Chana. Offtake in processed products i.e. chana dal and Besan failed to pick up. A rise in kharif crop MSP amidst improved demand in mandis and higher government procurement at these lower levels shall support prices in coming days.
Good Monsoon reports had a minimal impact on prices as the present levels are very low. Government announcements to supply free dal to about 20 crore households for the next 3 months to overcome the COVID-19 crisis, kept the uptrend limited. Gradual opening of mandis supported domestic demand even as stockists and millers demand remained low. Higher production estimates and higher arrivals by farmers however kept uptrend limited.
As per 3rd advanced estimates, pulses production during 2019-20 is estimated at 23.01 million tons versus 22.08 million tons in 2018-19. Chana production is estimated at 10.90 million tons versus 9.94 million tons in 2018-19. Prices have fallen a lot below MSP and may not be sustainable. Higher procurement by government may support prices as it reportedly targets to procure 2 million MT of Chickpeas for the year, approximately 20 percent of the total production.
Chana acreage as per latest reports has risen to 107.21 lakh hactare versus 96.19 lakh hactare same period in 2019. Continuous rise in MSP (Chana up 5 percent at Rs 4,620 per quintal) had seen production rising gradually over the last few years. As per APEDA reports, Pulses export for April-September 2019-20 has fallen to 1.18 lakh MT from 2.89 lakh MT in 2018-19 same period. Limits put on exports of Pulses have prevented strong recovery in 2019.
Imports, too, have fallen drastically to 8.16 lakh tons in 2018-19 versus 56.76 lakh tons in 2017-18 due to high stocks. As per the latest report of ABARES, Australian chickpea production is forecast to rise 2.48 percent in 2019-20 to 2.89 lakh tons as compared to 2.82 lakh tons in 2018-19.
The recent amendments to the Essential Commodities Act to impose stock limits under very exceptional conditions is likely to create demand from stockists and support prices in medium to long term for the counter. Chana July has support at Rs 4,080 per quintal and strong psychological support at Rs 4,000 per quintal. The resistance is at Rs 4,250 per quintal. A break above that could lead prices to the Rs 4,500 mark.
After a quiet opening this week, markets are likely to move up towards the end of the week as overall sentiments look firm.
The author is VP - Retail Research at Religare Broking.
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