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Last Updated : Jan 04, 2019 10:56 AM IST | Source:

Anand Rathi expects rebound in Kharif crop prices in coming months

Agricultural commodities closely follow seasonality and, thus, we may see prices of these kharif crops rebounding in coming months.

Moneycontrol Contributor @moneycontrolcom

Ravindra Rao

Seasonal supply pressures led to most kharif-grown commodities being negative in the last quarter of 2018. Be it fibre crop (cotton) or the legume bean (guar), the peak arrival period exerted pressure on prices.

Agricultural commodities closely follow seasonality and thus, we may see prices of these kharif crops rebounding in coming months. Rabi crops, especially mustard seed and chana will, however, be under pressure as harvesting will soon commence.

Q42018 was volatile for guar as the price surged from the season's low of Rs.4,150 in October to test a many-year high in November, then again declined to test the season's low in late December. Guar output has been hit drastically in the 2018-19 season due to scanty rainfall.

Seasonal supply pressure increased, post-Diwali, and piled pressure on prices. Guar seed arrivals since the beginning of the season (October) were around 33.4 lakh bags including 28.93 lakh of the new crop. Thus, we can say that, of the estimated 50-55 lakh bags produced, more than 50 percent has already arrived in the first three months.

The fall in guar futures now seems to have been contained as the peak supply season is nearing its close. Citing the supply shortage ahead, millers will start accumulating stocks in physical markets. On the trade front, guar-gum exports have been rising steadily for the past two years, after having been hit in FY15-16.

During April-November of FY18-19, exports were around 2.7 percent, or 8,923 tonnes higher than in the corresponding period last year. Export prospects are bright and this too will support the potential in the guar complex in Q1 2019.

In cotton, too, prices are expected to hold to the seasonal price pattern in the crop year 2018-19 (Oct-Sep). The peak harvesting period pushed down prices in late December to a seven-month low.

Supply-side fundamentals are comparatively weaker than in the last season; thus, cotton prices are bound to move higher as arrival pressures start receding in the coming months.

Another major Kharif crop, soybean is set to move higher in Q1 2019. However, unlike cotton and guar seed, soybean output in the 2018-19 season is considerably higher. The factor that could support prices to move up is overseas demand for soymeal.

The author is Head - Commodity Research & Advisory, Anand Rathi Commodities.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
First Published on Jan 4, 2019 10:56 am
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