On fundamentals, the long-term price outlook for chana is positive. In the short term, though, prices would be driven by the weather, harvesting pressure and the government’s procurement policy.
Ravindra V Rao
Pulses are always in the limelight, for surplus production and lower prices or vice-a-versa. 2018-19 is no different. This time, output of the largest grown rabi pulse crop (chana) is set to shrink after two years of higher production. Two back-to-back years of record production led to a huge build-up of chana stockpiles in India in 2017-18, which resulted in a steep fall in prices last year.
The lower prices prompted farmers to shift to other, more remunerative crops in the 2018-19 season. Thus, acreage under chana declined almost 10% this year. The government hiked the minimum support price (MSP) of chana by Rs 250 (to Rs 4,650) for 2018-19 season. Even then, the higher MSP failed to attract farmers as prices last year were almost 8-10% below the then support price (Rs 4,400 for 2017-18). Moreover, drought in the second-largest chana-producing state, Maharashtra, resulted in lower acreage in this season.
Chana prices tested 4,750 in early December, retreating thereafter amid fears of huge government-held stocks. Also, in Karnataka and AP, harvesting of the early-sown chana crop commenced in January followed by Maharashtra later in the month. This too piled pressure on chana prices in early February.
At the present juncture, the crop in many districts of MP (the largest chana-growing state) is in a ready-to-harvest condition. However, a cold wave in January and the recent reports of heavy rains and hailstorms have raised concerns about yield. A pull-back has thus been seen in chana prices in the past one week.
Weather may still play a critical role as it would not only affect the yield but also delay harvesting. The present situation depicts a positive price picture in the short term. However, with a pick-up in harvesting in MP and Rajasthan, chana prices are bound to slide by late March.
Chana production in 2018-19 may drop substantially from a record 112 lakh tonnes in 2017-18. The Madhya Pradesh farm department has pegged the 2018-19 chana output in the state at 52 lakh tonnes. Also, the state is expected to start procuring chana next month at the MSP.
Meanwhile, the market is awaiting the second advance estimates of the 2018-19 crop, to be released soon by the Agriculture Ministry. On fundamentals, the long-term price outlook for chana is positive. In the short term, though, prices would be driven by the weather, harvesting pressure and the government’s procurement policy.
The author is Head - Commodity Research & Advisory, Anand Rathi CommoditiesDisclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.