After the initial favourable report on the monsoon as it struck the Kerala coast on time, with good rains during the initial 2 weeks of the month, a report of slowdown in its activities by the Indian Meteorological Department (IMD) kept trend strong for the agri commodity prices towards end of the last week.
However, as seen earlier, a normal Monsoon report, too, did not affect the sentiment much. This was primarily because markets had already fallen a lot during the earlier 3 months due to lockdown effected by Coronavirus. The domestic and more importantly, export demand, got adversely affected.
This resulted in moderate fall in prices in most counters. Thus, the present levels were considered to be on the lower side and fundamentals did not support such prices – as per market sources.
Even as progress of monsoon towards central and North-West India remains critical – with these areas being the prime kharif growing areas, a few points need to be noted. We believe that even in a normal monsoon scenario, prices may not fall much – as explained above. But in case of delayed progress or a deficient monsoon, this could lead to a good surge in prices from these (low) levels. Also, since Indian crops are susceptible to rains, extremely excess rains leading to floods in later stages too, can be harmful for the crop- leading to firmness in prices.
Apart from this, the recent announcement by the Indian Government regarding special package for the farm sector will benefit farmers, traders, stockists and Industrialists. A rise in MSP (minimum support price), virtual scrapping of the Essential Commodities Act, allowing farmers more space throughput India to sell their products, spending on transportation and Infrastructure are some of the key areas that are likely to benefit the overall agricultural sector in the long term.
Doubling farmers' income by 2022 is the main aim of the Government. This will happen only when prices rise. This could set the trend for a Bullish momentum for the agri prices in the days, weeks and months to come.
Chana, Guar, Spices and Oil complex ended on a positive note last week. Chana is likely to touch Rs 4,400 per quintal, Guarseed Rs 4,000 per quintal and Guargum Rs 6,000 per quintal. Jeera, Dhaniya and Turmeric are all expected to recover by 4-6 percent in this week. Aided by a firm International market, Oil complex too may show some strong upside movement. Recovery is expected by 5-8 percent in RM Seed, Soybean, CPO and Refined Soy Oil.
As markets gradually open, an expected rise in trading activities could spur demand on the domestic and export front. Any favorable news on the weather front may, however, limit the upside movement- but only temporarily. An overall Bullish market is awaited for the agri sector in the coming week.
The author is VP - Retail Research at Religare Broking.
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